Exhibit 99.1
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| | Media | | Investors | | |
| | Mary Eshet | | Jim Rowe | | |
| | 704-383-7777 | | 415-396-8216 | | |
Friday, October 12, 2012
WELLS FARGO REPORTS RECORD QUARTERLY NET INCOME
Q3 Net Income of $4.9 billion; EPS of $0.88, Up 22 Percent from Prior Year
| • | | Continued strong financial results: |
| | o | Record Wells Fargo net income of $4.9 billion, up 27 percent (annualized) from prior quarter |
| | o | Record diluted earnings per common share of $0.88, up 29 percent (annualized) from prior quarter |
| | o | Pre-tax pre-provision profit (PTPP)1 of $9.1 billion, up 9 percent (annualized) from prior quarter |
| | o | Revenue of $21.2 billion, compared with $21.3 billion in prior quarter |
| | o | Noninterest expense of $12.1 billion, down $285 million from prior quarter; 57.1 percent efficiency ratio |
| | o | Return on average assets (ROA) of 1.45 percent, up 4 basis points from prior quarter |
| | o | Return on equity (ROE) of 13.38 percent, up 52 basis points from prior quarter |
| • | | Strong deposit and loan growth: |
| | o | Total average core checking and savings deposits up $16.9 billion from prior quarter |
| | o | Total loans of $782.6 billion, up $7.4 billion from prior quarter |
| | o | Core loan portfolio up $11.9 billion from prior quarter2 |
| • | | Maintained strong capital position: |
| | o | Tier 1 common equity3 under Basel I increased $4.1 billion to $105.8 billion, with Tier 1 common equity ratio of 10.06 percent under Basel I at September 30, 2012. Estimated Tier 1 common equity ratio of 8.02 percent under current Basel III capital proposals4 |
| | o | Purchased approximately 17 million shares of common stock in third quarter 2012 and an additional estimated 9 million shares through a forward repurchase transaction expected to settle in fourth quarter 2012 |
| • | | Solid underlying credit quality: |
| | o | Net charge-offs of $2.4 billion, or 1.21 percent (annualized) of average loans, including $567 million of net charge-offs from the implementation of newly issued regulatory guidance5 |
1 See footnote (2) on page 16 for more information on pre-tax pre-provision profit.
2 See table on page 4 for more information on core and non-strategic/liquidating loan portfolios.
3 See tables on page 38 for more information on Tier 1 common equity.
4 Estimated based on management’s current interpretation of the Basel III capital rules proposed by federal banking agencies in notices of proposed rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject to change depending on final promulgation of Basel III capital rules.
5 Office of the Comptroller of the Currency update to Bank Accounting Advisory Series issued third quarter 2012 (OCC guidance) which requires write-down of performing consumer loans restructured in bankruptcy to collateral value. See pages 5-7, including footnote 6, for additional information regarding the implementation of the OCC guidance and its effect on our third quarter credit metrics.
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| | o | Excluding the impact of the OCC guidance, net charge-offs of $1.8 billion or 0.92 percent (annualized) of average loans |
| | o | Provision for credit losses was $767 million lower than net loan charge-offs due to two factors: |
| | ¡ | $567 million increase in net loan charge-offs from the implementation of the OCC guidance (fully covered by loan loss reserves) |
| | ¡ | $200 million (pre-tax) reserve release due to continued strong underlying credit performance, compared with $400 million in prior quarter |
Selected Financial Information
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| | | | | | Quarter ended | |
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| | | Sept. 30, | | | June 30, | | | Sept. 30, | |
| | | 2012 | | | 2012 | | | 2011 | |
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Earnings | | | | | | | | | | | | |
Diluted earnings per common share | | $ | 0.88 | | | | 0.82 | | | | 0.72 | |
Wells Fargo net income (in billions) | | | 4.94 | | | | 4.62 | | | | 4.06 | |
Return on assets (ROA) | | | 1.45 | % | | | 1.41 | | | | 1.26 | |
Return on equity (ROE) | | | 13.38 | | | | 12.86 | | | | 11.86 | |
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Asset Quality | | | | | | | | | | | | |
Net charge-offs as a % of avg. total loans | | | 1.21 | | | | 1.15 | | | | 1.37 | |
Allowance as a % of total loans | | | 2.27 | | | | 2.41 | | | | 2.68 | |
Allowance as a % of annualized net charge-offs | | | 190 | | | | 211 | | | | 197 | |
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Other | | | | | | | | | | | | |
Revenue (in billions) | | $ | 21.21 | | | | 21.29 | | | | 19.63 | |
Efficiency ratio | | | 57.1 | | | | 58.2 | | | | 59.5 | |
Average loans (in billions) | | | 776.7 | | | | 768.2 | | | | 754.5 | |
Average core deposits (in billions) | | | 895.4 | | | | 880.6 | | | | 836.8 | |
Net interest margin | | | 3.66 | % | | | 3.91 | | | | 3.84 | |
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SAN FRANCISCO – Wells Fargo & Company (NYSE: WFC) reported record net income of $4.9 billion, or $0.88 per diluted common share, for third quarter 2012, up from $4.1 billion, or $0.72 per share, for third quarter 2011, and up from $4.6 billion, or $0.82 per share, for second quarter 2012. For the first nine months of 2012, net income was $13.8 billion, or $2.45 per share, compared with $11.8 billion, or $2.09 per share, a year ago.
“Through the efforts of our more than 265,000 team members, we’ve now achieved six consecutive quarters of record net income and EPS,” said Chairman and CEO John Stumpf. “By focusing on earning all of our customers’ business and providing outstanding service, we continued to generate growth across our diversified set of businesses. In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses. We remained diligent in managing costs and continued to have strong underlying credit performance as our loss mitigation efforts and the low interest rate environment helped improve affordability for our customers.”
Chief Financial Officer Tim Sloan added, “Our third quarter results demonstrated that the Company’s business model continues to serve shareholders well. Our performance reflected an ongoing focus on measures that drive value over the long-term, including increased PTPP, positive operating leverage, and
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solid ROA and ROE. In addition, our efficiency ratio of 57.1 percent in the third quarter improved compared with second quarter and remained within our 55 to 59 percent targeted range. While the economic and interest rate environments continue to present challenges for us and our industry, our diversified model and focus on our customers continued to produce strong quarterly results.”
Revenue
Revenue was $21.2 billion in the third quarter, compared with $21.3 billion in second quarter 2012, as approximately $300 million of higher noninterest income was more than offset by lower net interest income. Businesses generating linked-quarter revenue growth included asset backed finance, asset management, brokerage services, commercial mortgage servicing, credit card, dealer services, debit card, equity funds, personal credit management, real estate capital markets, retail sales finance, retirement services, and small business administration loans.
Net Interest Income
Net interest income was $10.7 billion in third quarter, down from $11.0 billion in second quarter 2012. The decline in net interest income was largely driven by lower income from variable sources, such as fee income and purchased credit-impaired (PCI) loan resolutions which were elevated in the second quarter. In addition, income from the available-for-sale (AFS) securities portfolio declined as the pace of mortgage-backed securities (MBS) pay-downs increased in response to lower interest rates, and we replaced a large portion of the run-off with lower yielding, but shorter duration securities. The income impact of lower levels of long-term securities purchases was partially offset by our retention of $9.8 billion of high-quality, conforming first real estate mortgages.
On a linked-quarter basis, our net interest margin declined 25 basis points to 3.66 percent, driven by three primary items. First, the impact of lower income from variable sources described above caused a decline of approximately 10 basis points. Second, given our cautious stance on investment portfolio growth in the current low rate environment, deposit growth of $23 billion (10 percent annualized) caused cash and short term investments to increase, diluting the margin by approximately 7 basis points. Finally, the impact of lower rates, both in terms of run-off and new activity, reduced the margin by 8 basis points, with approximately 6 basis points of the decline from the AFS portfolio and approximately 2 basis points from the loan portfolios.
Noninterest Income
Noninterest income was $10.6 billion, up from $10.3 billion in second quarter 2012. The increase was driven by a $252 million increase in market sensitive revenue, primarily trading gains including deferred compensation plan investments offset in employee benefits expense. The Company also benefitted from increases in deposit service charges, trust and investment fees, and card fees. Insurance declined $108 million due to seasonally lower insurance revenue, with a related decline in insurance commission expense.
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Mortgage banking noninterest income was $2.8 billion, down $86 million from second quarter 2012, on $139 billion of originations, compared with $131 billion of originations in second quarter. During the third quarter, the Company retained on balance sheet 1-4 family conforming first mortgage loans, forgoing approximately $200 million of fee revenue that could have been generated had the loans been originated for sale during the quarter along with other agency conforming loan production. The Company provided $462 million for mortgage loan repurchase losses, compared with $669 million in second quarter (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were $142 million, compared with $377 million in second quarter due to MSR valuation adjustments made in the third quarter for increased servicing and foreclosure costs. The ratio of MSRs to related loans serviced for others was at a historical low of 63 basis points and the average note rate on the servicing portfolio was 4.87 percent. The unclosed pipeline at September 30, 2012 was $97 billion, compared with $102 billion at June 30, 2012.
The Company had net unrealized securities gains of $12.4 billion at September 30, 2012, compared with $9.5 billion at June 30, 2012. Period-end securities available for sale balances increased $2.5 billion.
Noninterest Expense
Noninterest expense declined $285 million in the quarter to $12.1 billion, compared with $12.4 billion in second quarter 2012. The decline in noninterest expense was due primarily to $243 million of lower operating losses, $112 million of seasonally lower insurance commissions, $104 million of lower severance expense, and our third consecutive quarterly reduction in foreclosed asset expense, down $42 million from prior quarter. The expense improvements were partially offset by higher deferred compensation expense of $152 million offset in noninterest income and by increases in occupancy and advertising costs. The Company’s efficiency ratio improved to 57.1 percent from 58.2 percent in second quarter 2012 and 59.5 percent in third quarter 2011, and the Company is well positioned to remain within its targeted range of 55 to 59 percent in the fourth quarter.
Loans
Total loans were $782.6 billion at September 30, 2012, up $7.4 billion from $775.2 billion at June 30, 2012. Included in this growth was $9.8 billion of 1-4 family conforming first mortgage production retained on the balance sheet. In addition, there was growth in auto, credit card, private student lending, and commercial and industrial (C&I) loan balances. The growth in core loan portfolios more than offset the reduction in the non-strategic/liquidating portfolios, which declined $4.5 billion in the quarter.
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| | | September 30, 2012 | | | June 30, 2012 | |
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| (in millions) | | Core | | | Liquidating (1) | | | Total | | | Core | | | Liquidating (1) | | | Total | |
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Commercial | | $ | 348,696 | | | | 3,836 | | | | 352,532 | | | | 349,774 | | | | 4,278 | | | | 354,052 | |
Consumer | | | 335,278 | | | | 94,820 | | | | 430,098 | | | | 322,297 | | | | 98,850 | | | | 421,147 | |
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Total loans | | $ | 683,974 | | | | 98,656 | | | | 782,630 | | | | 672,071 | | | | 103,128 | | | | 775,199 | |
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Change from prior quarter: | | $ | 11,903 | | | | (4,472 | ) | | | 7,431 | | | | 13,782 | | | | (5,104 | ) | | | 8,678 | |
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| (1) | See table on page 35 for additional information on non-strategic/liquidating loan portfolios. Management believes that the above information provides useful disclosure regarding the Company’s ongoing loan portfolios. |
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Deposits
Average core deposits were $895.4 billion, up 7 percent from a year ago and up 7 percent (annualized) from second quarter 2012. Average core checking and savings deposits were $837.2 billion, up 9 percent from a year ago and up 8 percent (annualized) from second quarter 2012. Average mortgage escrow deposits were $40.0 billion, compared with $28.3 billion a year ago and $35.4 billion in second quarter 2012. Average core checking and savings deposits were 94 percent of average core deposits, up from 93 percent in the prior quarter and 92 percent a year ago. The average deposit cost for third quarter 2012 was 18 basis points, compared with 19 basis points in second quarter 2012. Average core deposits were 115 percent of average loans, up slightly from second quarter 2012.
Capital
Capital increased in the third quarter, with Tier 1 common equity reaching $105.8 billion under Basel I, or 10.06 percent of risk-weighted assets. The third quarter ratio reflected refinements to the risk weighting of certain unused lending commitments that provide for the ability to issue standby letters of credit, which reduced the ratio by 32 basis points. This refinement did not affect our estimated Tier 1 common equity ratio under Basel III capital proposals, which rose to 8.02 percent at the end of the quarter.
In third quarter, the Company purchased approximately 17 million shares of its common stock and an additional estimated 9 million shares through a forward repurchase transaction expected to settle in fourth quarter 2012, and paid a quarterly common stock dividend of $0.22 per share.
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| | | Sept. 30, | | | June 30, | | | Sept. 30, | |
| (as a percent of total risk-weighted assets) | | 2012 | | | 2012 | | | 2011 | |
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Ratios under Basel I (1): | | | | | | | | | | | | |
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Tier 1 common equity (2) | | | 10.06 | % | | | 10.08 | | | | 9.34 | |
Tier 1 capital | | | 11.66 | | | | 11.69 | | | | 11.26 | |
Tier 1 leverage | | | 9.45 | | | | 9.25 | | | | 8.97 | |
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| (1) | September 30, 2012, ratios are preliminary. |
| (2) | See table on page 38 for more information on Tier 1 common equity. |
Credit Quality
“Underlying credit quality continued to show improvement in the third quarter, as the overall financial condition of businesses and consumers strengthened, the housing market in many areas of the nation improved, and we continued to work to reduce problem assets and make new, high quality loans,” said Chief Risk Officer Mike Loughlin.
Reported credit metrics for the quarter were affected by the implementation in third quarter of the OCC guidance, which affected consumer loans where the borrower’s obligation to us has been discharged in bankruptcy and the borrower has not reaffirmed the debt. As of September 30, 2012, only 8 percent of loans within this category were 30 days or more past due. Implementation of the OCC guidance affected nonperforming loans and net charge-offs as follows:
| • | | $1.4 billion reclassification of performing consumer loans to nonaccrual status, consisting of $1.0 billion of first mortgages, $262 million of junior liens and $155 million of auto loans |
| • | | $567 million increase in net loan charge-offs, fully covered by loan loss reserves |
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“Excluding the impact of the OCC guidance, we saw improvement in charge-offs, recoveries, and nonperforming assets. Early stage delinquencies remained relatively stable from prior quarter. Absent significant deterioration in the economy, we continue to expect future reserve releases,” said Loughlin.
Net Loan Charge-offs
Net loan charge-offs, summarized in the table below, were $2.4 billion in third quarter 2012 or 121 basis points of average loans. Excluding the $567 million in charge-offs resulting from implementation of the OCC guidance, net charge-offs were $1.8 billion or 92 basis points with commercial losses of $217 million, or 24 basis points, and consumer losses of $1.6 billion or 148 basis points6.
Net Loan Charge-Offs
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| | | Quarter ended | |
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| | | September 30, 2012 | | | June 30, 2012 | | | March 31, 2012 | |
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| ($ in millions) | | Net loan charge- offs | | | As a % of
average loans (1) | | | Net loan charge- offs | | | As a % of average loans (1) | | | Net loan charge- offs | | | As a % of average
loans (1) | |
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Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 131 | | | | 0.29 | % | | $ | 249 | | | | 0.58 | % | | $ | 256 | | | | 0.62 | % |
Real estate mortgage | | | 54 | | | | 0.21 | | | | 81 | | | | 0.31 | | | | 46 | | | | 0.17 | |
Real estate construction | | | 1 | | | | 0.03 | | | | 17 | | | | 0.40 | | | | 67 | | | | 1.43 | |
Lease financing | | | 1 | | | | 0.03 | | | | - | | | | - | | | | 2 | | | | 0.06 | |
Foreign | | | 30 | | | | 0.29 | | | | 11 | | | | 0.11 | | | | 14 | | | | 0.14 | |
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Total commercial | | | 217 | | | | 0.24 | | | | 358 | | | | 0.42 | | | | 385 | | | | 0.45 | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 673 | | | | 1.15 | | | | 743 | | | | 1.30 | | | | 791 | | | | 1.39 | |
Real estate 1-4 family junior lien mortgage | | | 1,036 | | | | 5.17 | | | | 689 | | | | 3.38 | | | | 763 | | | | 3.62 | |
Credit card | | | 212 | | | | 3.67 | | | | 240 | | | | 4.37 | | | | 242 | | | | 4.40 | |
Other revolving credit and installment | | | 220 | | | | 1.00 | | | | 170 | | | | 0.79 | | | | 214 | | | | 0.99 | |
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Total consumer | | | 2,141 | | | | 2.01 | | | | 1,842 | | | | 1.76 | | | | 2,010 | | | | 1.91 | |
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Total | | $ | 2,358 | | | | 1.21 | % | | $ | 2,200 | | | | 1.15 | % | | $ | 2,395 | | | | 1.25 | % |
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| (1) | Quarterly net charge-offs as a percentage of average loans are annualized. See explanation on page 31 of the accounting for purchased credit-impaired (PCI) loans and the impact on selected financial ratios. |
Nonperforming Assets
Nonperforming assets increased by $368 million in the quarter including a $1.4 billion increase in nonperforming loans resulting from implementation of the OCC guidance, ending the quarter at $25.3 billion, compared with $24.9 billion in second quarter 2012. Nonaccrual loans increased to $21.0 billion from $20.6 billion in second quarter; however, apart from implementing the OCC guidance, total commercial and consumer nonaccrual loans declined in the quarter by $975 million. Foreclosed assets were $4.2 billion, down from $4.3 billion in second quarter 2012.
6 Management believes that the presentation in this news release of information excluding the impact of the OCC guidance provides useful disclosure regarding the underlying credit quality of the Company’s loan portfolios.
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Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)
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| | | September 30, 2012 | | | June 30, 2012 | | | March 31, 2012 | |
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| | | | | | As a | | | | | | As a | | | | | | As a | |
| | | | | | % of | | | | | | % of | | | | | | % of | |
| | | Total | | | total | | | Total | | | total | | | Total | | | total | |
| ($ in millions) | | balances | | | loans | | | balances | | | loans | | | balances | | | loans | |
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Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,404 | | | | 0.79 | % | | $ | 1,549 | | | | 0.87 | % | | $ | 1,726 | | | | 1.02 | % |
Real estate mortgage | | | 3,599 | | | | 3.44 | | | | 3,832 | | | | 3.63 | | | | 4,081 | | | | 3.85 | |
Real estate construction | | | 1,253 | | | | 7.08 | | | | 1,421 | | | | 8.08 | | | | 1,709 | | | | 9.21 | |
Lease financing | | | 49 | | | | 0.40 | | | | 43 | | | | 0.34 | | | | 45 | | | | 0.34 | |
Foreign | | | 66 | | | | 0.17 | | | | 79 | | | | 0.20 | | | | 38 | | | | 0.10 | |
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Total commercial | | | 6,371 | | | | 1.81 | | | | 6,924 | | | | 1.96 | | | | 7,599 | | | | 2.20 | |
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Consumer: | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 11,195 | | | | 4.65 | | | | 10,368 | | | | 4.50 | | | | 10,683 | | | | 4.67 | |
Real estate 1-4 family junior lien mortgage | | | 3,140 | | | | 4.02 | | | | 3,091 | | | | 3.82 | | | | 3,558 | | | | 4.28 | |
Other revolving credit and installment | | | 338 | | | | 0.39 | | | | 195 | | | | 0.22 | | | | 186 | | | | 0.21 | |
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Total consumer (1) | | | 14,673 | | | | 3.41 | | | | 13,654 | | | | 3.24 | | | | 14,427 | | | | 3.43 | |
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Total nonaccrual loans | | | 21,044 | | | | 2.69 | | | | 20,578 | | | | 2.65 | | | | 22,026 | | | | 2.87 | |
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Foreclosed assets: | | | | | | | | | | | | | | | | | | | | | | | | |
GNMA | | | 1,479 | | | | | | | | 1,465 | | | | | | | | 1,352 | | | | | |
Non GNMA | | | 2,730 | | | | | | | | 2,842 | | | | | | | | 3,265 | | | | | |
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Total foreclosed assets | | | 4,209 | | | | | | | | 4,307 | | | | | | | | 4,617 | | | | | |
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Total nonperforming assets | | $ | 25,253 | | | | 3.23 | % | | $ | 24,885 | | | | 3.21 | % | | $ | 26,643 | | | | 3.48 | % |
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Change from prior quarter: | | | | | | | | | | | | | | | | | | | | | | | | |
Total nonaccrual loans | | $ | 466 | | | | | | | $ | (1,448) | | | | | | | $ | 722 | | | | | |
Total nonperforming assets | | | 368 | | | | | | | | (1,758) | | | | | | | | 678 | | | | | |
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| (1) | Includes $1.4 billion at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series. The updated guidance requires us to place on nonaccrual status those performing loans where the borrower’s obligation to us has been restructured in bankruptcy. |
Loans 90 Days or More Past Due and Still Accruing
Loans 90 days or more past due and still accruing (excluding government insured/guaranteed) totaled $1.5 billion at September 30, 2012, compared with $1.4 billion at June 30, 2012. Loans 90 days or more past due and still accruing with repayments insured by the Federal Housing Administration (FHA) or predominantly guaranteed by the Department of Veterans Affairs (VA) for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program were $21.4 billion at September 30, 2012, down slightly from $21.5 billion at June 30, 2012.
Allowance for Credit Losses
The allowance for credit losses, including the allowance for unfunded commitments, totaled $17.8 billion at September 30, 2012, down from $18.6 billion at June 30, 2012. The reduction in the allowance included $567 million of net charge-offs resulting from implementation of the OCC guidance. While the impact of the OCC guidance accelerated charge-offs of performing consumer loans into the third quarter, the allowance for credit losses had full coverage for these charge-offs. The reduction also included a $200 million reserve release due to strong underlying credit, compared with a $400 million release in the prior quarter. The allowance coverage to total loans was 2.27 percent, compared with 2.41 percent in second quarter 2012. The allowance covered 1.9 times annualized third quarter net charge-offs, compared with 2.1 times in the prior quarter. The allowance coverage to nonaccrual loans was 85 percent at September 30, 2012, compared with 91 percent at June 30, 2012. “We believe the allowance was appropriate for losses inherent in the loan portfolio at September 30, 2012,” said Loughlin.
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Business Segment Performance
Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:
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| | | | | | | | | Quarter ended | |
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| | | Sept. 30, | | | June 30, | | | Sept. 30, | |
| (in millions) | | 2012 | | | 2012 | | | 2011 | |
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Community Banking | | $ | 2,740 | | | | 2,535 | | | | 2,324 | |
Wholesale Banking | | | 1,993 | | | | 1,881 | | | | 1,803 | |
Wealth, Brokerage and Retirement | | | 338 | | | | 343 | | | | 290 | |
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More financial information about the business segments is on pages 39 and 40.
Community Bankingoffers a complete line of diversified financial products and services for consumers and small businesses. These products include investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Mortgage business units.
Selected Financial Information
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| | | | | | | | | Quarter ended | |
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| | | Sept. 30, | | | June 30, | | | Sept. 30, | |
| (in millions) | | 2012 | | | 2012 | | | 2011 | |
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Total revenue | | $ | 13,110 | | | | 13,092 | | | | 12,510 | |
Provision for credit losses | | | 1,627 | | | | 1,573 | | | | 1,974 | |
Noninterest expense | | | 7,402 | | | | 7,580 | | | | 6,905 | |
Segment net income | | | 2,740 | | | | 2,535 | | | | 2,324 | |
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| (in billions) | | | | | | | | | |
Average loans | | | 485.3 | | | | 483.9 | | | | 489.7 | |
Average assets | | | 765.1 | | | | 746.6 | | | | 751.8 | |
Average core deposits | | | 594.5 | | | | 586.1 | | | | 556.4 | |
| |
Community Banking reported net income of $2.7 billion, up $205 million, or 8 percent, from second quarter 2012. Revenue increased $18 million from second quarter 2012, primarily due to continued growth in deposit service charges and higher gains on deferred compensation plan investments (offset in employee benefits expense), offset by lower investment income and mortgage banking revenue. Noninterest expense decreased $178 million, or 2 percent, from second quarter 2012, largely the result of lower operating losses and lower severance expense associated with our efficiency and cost save initiatives, partially offset by higher deferred compensation expense (offset in revenue).
Net income was up $416 million, or 18 percent, from third quarter 2011. Revenue increased $600 million, or 5 percent, primarily due to higher volume-related mortgage banking income and growth in deposit service charges, partially mitigated by higher equity gains in prior year, planned runoff of non-strategic loan balances and lower debit card revenue due to regulatory changes enacted in October 2011. Noninterest expense increased $497 million, or 7 percent, from third quarter 2011, largely the result of higher mortgage volume-related expenses and operating losses. The provision for credit losses was $347 million lower than a year ago due to improved portfolio performance.
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Regional Banking
| | o | Retail Bank household cross-sell ratio of 6.04 products per household, up from 5.90 year-over-year; cross-sell in the West reached 6.40, compared with 5.56 in the East7 |
| | o | Consumer checking accounts essentially flat to prior year7 |
| | o | Consumer credit card, lines of credit and loan product solutions (sales) in the retail banking stores were nearly 1.5 times the prior year |
| | o | Partner referrals that resulted in a sale, including products such as insurance, mortgage and student lending, up more than 30 percent from the prior year |
| | o | Continued investments in the East; in third quarter, platform banker FTE (active, full-time equivalent) grew by more than 500 on a linked quarter basis |
| • | | Small Business/Business Banking |
| | o | Business checking accounts up a net 3.9 percent year-over-year7 |
| | o | Business Direct credit card, lines of credit and loan product solutions (primarily under $100,000 sold through our retail banking stores) up more than 45 percent from the prior year |
| | o | $11.4 billion in net new loan commitments to small business customers (primarily with annual revenues less than $20 million) in the first three quarters of 2012, up approximately 30 percent from prior year |
| | o | America’s #1 small business lender (in both loans under $100,000 and under $1,000,000) and #1 lender to small businesses in low- and moderate-income areas (2011 CRA data, released August 2012) |
| | o | For the second year in a row, Wells Fargo has approved more than $1 billion in SBA 7(a) loan dollars for small businesses |
| • | | Online and Mobile Banking |
| | o | 21.4 million active online customers7 |
| | o | 8.9 million active mobile customers7 |
| | o | “Best Consumer Internet Bank” in the U.S. for the 3rd consecutive year (Global Finance Magazine, July 2012) |
Consumer Lending Group
| | o | Originations of $139 billion, up from $131 billion in prior quarter |
| | o | Applications of $188 billion, compared with $208 billion in prior quarter |
| | o | Application pipeline of $97 billion at quarter end, compared with $102 billion at June 30, 2012 |
| | o | Residential mortgage servicing portfolio of $1.9 trillion |
7 Data as of August 2012. Comparisons are August 2012 compared with August 2011.
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| | o | Credit card penetration in retail banking households rose to 32.1 percent7, up from 31.0 percent in prior quarter and 28.1 percent in prior year |
| | o | Auto originations of $6.3 billion, down 3 percent from prior quarter and up 20 percent from prior year |
Wholesale Bankingprovides financial solutions to businesses across the United States and globally with annual sales generally in excess of $20 million. Products & business segments include Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, Asset Backed Finance, and Asset Management.
Selected Financial Information
| | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Sept. 30,
2011 | |
| |
Total revenue | | $ | 5,949 | | | | 6,117 | | | | 5,135 | |
Provision (reversal of provision) for credit losses | | | (57 | ) | | | 188 | | | | (178 | ) |
Noninterest expense | | | 2,908 | | | | 3,113 | | | | 2,689 | |
Segment net income | | | 1,993 | | | | 1,881 | | | | 1,803 | |
| | | |
(in billions) | | | | | | | | | | | | |
Average loans | | | 277.1 | | | | 270.2 | | | | 253.4 | |
Average assets | | | 490.7 | | | | 478.4 | | | | 437.1 | |
Average core deposits | | | 225.4 | | | | 220.9 | | | | 209.3 | |
| |
Wholesale Banking reported record net income of $2.0 billion, up $112 million, or 6 percent, from second quarter 2012. Revenue of $5.9 billion decreased 3 percent from second quarter 2012 as strong growth across many businesses, including asset-backed finance, asset management, real estate capital markets, and sales and trading, was more than offset by seasonally lower crop insurance revenue and lower PCI resolution income. Noninterest expense decreased $205 million, or 7 percent, from second quarter 2012 on seasonally lower insurance commissions and lower foreclosed asset expense. The provision for credit losses reflected a net reversal of $57 million in third quarter, compared with a provision of $188 million in second quarter. This was due both to a lower level of net loan charge-offs and an increase in the reserve release.
Net income was up $190 million, or 11 percent, from third quarter 2011 led by higher pre-tax pre provision income and lower net charge-offs. Revenue increased $814 million, or 16 percent, from third quarter 2011 driven by broad-based business growth, including acquisitions and strong loan and deposit growth. Noninterest expense increased $219 million, or 8 percent, from third quarter 2011 due to higher personnel expenses related to revenue growth and higher non-personnel expenses related to growth initiatives and compliance and regulatory requirements. Despite an improvement of $119 million in net charge-offs, the provision for credit losses was $121 million higher than third quarter 2011 due to $240 million in lower reserve releases. The third quarter 2012 provision included a $110 million reserve release, compared with $350 million a year ago.
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| • | | 9 percent year-over-year average loan and 12 percent average asset growth. The growth came from nearly all portfolios, including asset backed finance, capital finance, commercial banking, commercial real estate, and corporate banking |
| • | | Nine consecutive quarters of average loan growth in Commercial Banking |
| • | | Average core deposits up 8 percent from prior year |
| • | | Investment banking year to date revenue from commercial and corporate customers increased 13 percent for the same period in 2011 due to attractive capital markets conditions and continued momentum in cross selling |
| • | | Completed acquisition of Merlin Securities, LLC, a prime brokerage services and technology provider |
| • | | Best U.S. Bank, 2012 Euromoney Awards for Excellence |
Wealth, Brokerage and Retirementprovides a full range of financial advisory services to clients using a planning approach to meet each client’s needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and trust. Abbot Downing meets the unique needs of ultra high net worth clients. Brokerage serves customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.
Selected Financial Information
| | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Sept. 30,
2011 | |
| |
Total revenue | | $ | 3,033 | | | | 2,971 | | | | 2,888 | |
Provision for credit losses | | | 30 | | | | 37 | | | | 48 | |
Noninterest expense | | | 2,457 | | | | 2,376 | | | | 2,371 | |
Segment net income | | | 338 | | | | 343 | | | | 290 | |
| | | |
| (in billions) | | | | | | | | | |
Average loans | | | 42.5 | | | | 42.5 | | | | 43.1 | |
Average assets | | | 163.8 | | | | 160.9 | | | | 158.4 | |
Average core deposits | | | 136.7 | | | | 134.2 | | | | 133.3 | |
| |
Wealth, Brokerage and Retirement reported net income of $338 million, down $5 million from second quarter 2012. Revenue was $3.0 billion, up 2 percent from second quarter 2012, and benefited from $45 million in gains on deferred compensation plan investments (offset in expense, compared with $31 million in losses in second quarter 2012). Excluding deferred compensation, revenue was flat due to lower net interest income and reduced securities gains in the brokerage business, partially offset by higher asset-based fees and brokerage transaction revenue. Total provision for credit losses decreased $7 million from second quarter 2012. The provision in both periods included a $10 million credit reserve release. Noninterest expense increased 3 percent from second quarter 2012 related to higher deferred compensation plan expense. Third quarter 2012 results included $45 million in deferred compensation plan expense, compared with a $32 million benefit in second quarter. Apart from the $77 million change in deferred compensation plan expense, noninterest expense was flat.
- 12 -
Net income rose $48 million from third quarter 2011. Revenue increased 5 percent from third quarter 2011 due to $45 million in gains on deferred compensation plan investments (offset in expense, compared with $128 million in losses in third quarter 2011). Excluding deferred compensation, revenue was down 1 percent primarily due to lower net interest income and reduced securities gains in the brokerage business, partially offset by growth in managed account fee revenue. Total provision for credit losses decreased $18 million from third quarter 2011. Noninterest expense increased 4 percent from third quarter 2011 driven by higher deferred compensation plan expense. Third quarter 2012 results included $45 million in deferred compensation plan expense, compared with a $125 million benefit a year ago. Apart from the $170 million change in deferred compensation plan expense, noninterest expense decreased 3 percent.
Retail Brokerage
| • | | Client assets of $1.2 trillion, up 11 percent from prior year |
| • | | Managed account assets increased $59 billion, or 25 percent, from prior year driven by strong net flows and market performance |
| • | | Strong deposit growth, with average balances up 9 percent from prior year |
Wealth Management
| • | | Client assets of $199 billion, up 4 percent from prior year |
| • | | Recently named the 4th largest U.S. Wealth Manager according to Barron’s Annual Wealth Managers Survey |
Retirement
| • | | Institutional Retirement plan assets of $260 billion, up 14 percent from prior year |
| • | | IRA assets of $295 billion, up 13 percent from prior year |
Conference Call
The Company will host a live conference call on Friday, October 12, at 7 a.m. PDT (10 a.m. EDT). To access the call, please dial 866-872-5161 (U.S. and Canada) or 706-643-1962 (International). No password is required. The call is also available online atwellsfargo.com/invest_relations/earnings andhttp://us.meeting-stream.com/wellsfargocompany_101212.
A replay of the conference call will be available beginning at approximately noon PDT (3 p.m. EDT) on October 12 through Friday, October 19. Please dial 855-859-2056 (U.S. and Canada) or 404-537-3406 (International) and enter Conference ID #18860134. The replay will also be available online atwellsfargo.com/invest_relations/earnings.
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Cautionary Statement about Forward-Looking Information
In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “target,” “should,” “may,” “can,” “will,” “outlook,” “project,” “appears” or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality and performance, and the appropriateness of the allowance for loan losses, including our current expectation of future reserve releases; (ii) our expectations regarding noninterest expense and our targeted efficiency ratio for the remainder of 2012 as part of our expense management initiatives; and (iii) our estimate regarding our Tier 1 common equity ratio under proposed Basel III capital rules as of September 30, 2012.
Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, and the sovereign debt crisis and economic difficulties in Europe; our capital requirements (including under regulatory capital standards as determined and interpreted by applicable regulatory authorities such as the proposed Basel III capital rules) and our ability to generate capital internally or raise capital on favorable terms; financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses (including the Dodd-Frank Wall Street Reform and Consumer Protection Act), as well as our ability to mitigate the loss of revenue and income from financial services reform and other regulation and legislation; the extent of success in our loan modification efforts, including the effects of regulatory requirements, or changes in regulatory requirements, relating to loan modifications; the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties; negative effects relating to mortgage servicing and foreclosures, as well as effects associated with our settlement with the Department of Justice and other federal and state government entities related to our mortgage servicing and foreclosure practices, including changes in our procedures or practices and/or industry standards or practices, regulatory or judicial requirements, penalties or fines, increased servicing and other costs or obligations, including loan modification requirements, or delays or moratoriums on foreclosures; our ability to realize our efficiency ratio target as part of our expense management initiatives when and in the range targeted, including as a result of business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our businesses and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers; recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; the effect of the current low interest rate environment or changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgage loans; our ability to sell more products to our customers; the effect of fluctuations in stock market prices on fee income from our brokerage, asset and wealth management businesses; our election to provide support to our money market funds; changes in the value of our venture capital investments; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; changes in our credit ratings and changes in the credit ratings of our customers or counterparties; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations and legal actions; the loss of checking and saving account deposits to other investments such as the stock market; and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if housing prices decline and unemployment worsens. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC and available on the SEC’s website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.
- 14 -
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.4 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com), and has offices in more than 35 countries to support the bank’s customers who conduct business in the global economy. With approximately 265,000 full-time equivalent team members, Wells Fargo serves one in three households in United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2012 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.
# # #
Wells Fargo & Company and Subsidiaries
QUARTERLY FINANCIAL DATA
TABLE OF CONTENTS
| | | | |
| | | Pages | |
| |
Summary Information | | | | |
Summary Financial Data | | | 16-17 | |
| |
Income | | | | |
Consolidated Statement of Income | | | 18 | |
Consolidated Statement of Comprehensive Income | | | 19 | |
Condensed Consolidated Statement of Changes in Total Equity | | | 19 | |
Five Quarter Consolidated Statement of Income | | | 20 | |
Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) | | | 21-22 | |
Noninterest Income and Noninterest Expense | | | 23-24 | |
| |
Balance Sheet | | | | |
Consolidated Balance Sheet | | | 25-26 | |
Five Quarter Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) | | | 27 | |
Securities Available for Sale | | | 28 | |
| |
Loans | | | | |
Loans | | | 28 | |
Nonperforming Assets | | | 29 | |
Loans 90 Days or More Past Due and Still Accruing | | | 30 | |
Purchased Credit-Impaired Loans | | | 31-33 | |
Pick-A-Pay Portfolio | | | 34 | |
Non-Strategic and Liquidating Loan Portfolios | | | 35 | |
Home Equity Portfolios | | | 35 | |
Changes in Allowance for Credit Losses | | | 36-37 | |
| |
Equity | | | | |
Tier 1 Common Equity | | | 38 | |
| |
Operating Segments | | | | |
Operating Segment Results | | | 39-40 | |
| |
Other | | | | |
Mortgage Servicing and other related data | | | 41-43 | |
16
Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended September 30, | | | % | | | Nine months ended Sept. 30, | | | % | |
| | | | | | | | | | | | | | | | |
| ($ in millions, except per share amounts) | | 2012 | | | 2011 | | | Change | | | 2012 | | | 2011 | | | Change | |
| |
| | | | | | |
For the Period | | | | | | | | | | | | | | | | | | | | | | | | |
Wells Fargo net income | | $ | 4,937 | | | | 4,055 | | | | 22 | % | | $ | 13,807 | | | | 11,762 | | | | 17 | % |
Wells Fargo net income applicable to common stock | | | 4,717 | | | | 3,839 | | | | 23 | | | | 13,142 | | | | 11,137 | | | | 18 | |
Diluted earnings per common share | | | 0.88 | | | | 0.72 | | | | 22 | | | | 2.45 | | | | 2.09 | | | | 17 | |
Profitability ratios (annualized): | | | | | | | | | | | | | | | | | | | | | | | | |
Wells Fargo net income to average assets (ROA) | | | 1.45 | % | | | 1.26 | | | | 15 | | | | 1.39 | | | | 1.25 | | | | 11 | |
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | | | 13.38 | | | | 11.86 | | | | 13 | | | | 12.81 | | | | 11.92 | | | | 7 | |
Efficiency ratio (1) | | | 57.1 | | | | 59.5 | | | | (4) | | | | 58.5 | | | | 61.1 | | | | (4) | |
Total revenue | | $ | 21,213 | | | | 19,628 | | | | 8 | | | $ | 64,138 | | | | 60,343 | | | | 6 | |
Pre-tax pre-provision profit (PTPP) (2) | | | 9,101 | | | | 7,951 | | | | 14 | | | | 26,636 | | | | 23,458 | | | | 14 | |
Dividends declared per common share | | | 0.22 | | | | 0.12 | | | | 83 | | | | 0.66 | | | | 0.36 | | | | 83 | |
Average common shares outstanding | | | 5,288.1 | | | | 5,275.5 | | | | - | | | | 5,292.7 | | | | 5,280.2 | | | | - | |
Diluted average common shares outstanding | | | 5,355.6 | | | | 5,319.2 | | | | 1 | | | | 5,355.7 | | | | 5,325.6 | | | | 1 | |
Average loans | | $ | 776,734 | | | | 754,544 | | | | 3 | | | $ | 771,200 | | | | 753,293 | | | | 2 | |
Average assets | | | 1,354,340 | | | | 1,281,369 | | | | 6 | | | | 1,326,384 | | | | 1,257,977 | | | | 5 | |
Average core deposits (3) | | | 895,374 | | | | 836,845 | | | | 7 | | | | 882,224 | | | | 813,865 | | | | 8 | |
Average retail core deposits (4) | | | 630,053 | | | | 599,227 | | | | 5 | | | | 623,671 | | | | 592,156 | | | | 5 | |
Net interest margin | | | 3.66 | % | | | 3.84 | | | | (5) | | | | 3.82 | | | | 3.96 | | | | (4) | |
| | | | | | |
At Period End | | | | | | | | | | | | | | | | | | | | | | | | |
Securities available for sale | | $ | 229,350 | | | | 207,176 | | | | 11 | | | $ | 229,350 | | | | 207,176 | | | | 11 | |
Loans | | | 782,630 | | | | 760,106 | | | | 3 | | | | 782,630 | | | | 760,106 | | | | 3 | |
Allowance for loan losses | | | 17,385 | | | | 20,039 | | | | (13) | | | | 17,385 | | | | 20,039 | | | | (13) | |
Goodwill | | | 25,637 | | | | 25,038 | | | | 2 | | | | 25,637 | | | | 25,038 | | | | 2 | |
Assets | | | 1,374,715 | | | | 1,304,945 | | | | 5 | | | | 1,374,715 | | | | 1,304,945 | | | | 5 | |
Core deposits (3) | | | 901,075 | | | | 849,632 | | | | 6 | | | | 901,075 | | | | 849,632 | | | | 6 | |
Wells Fargo stockholders’ equity | | | 154,679 | | | | 137,768 | | | | 12 | | | | 154,679 | | | | 137,768 | | | | 12 | |
Total equity | | | 156,059 | | | | 139,244 | | | | 12 | | | | 156,059 | | | | 139,244 | | | | 12 | |
Capital ratios: | | | | | | | | | | | | | | | | | | | | | | | | |
Total equity to assets | | | 11.35 | % | | | 10.67 | | | | 6 | | | | 11.35 | | | | 10.67 | | | | 6 | |
Risk-based capital (5): | | | | | | | | | | | | | | | | | | | | | | | | |
Tier 1 capital | | | 11.66 | | | | 11.26 | | | | 4 | | | | 11.66 | | | | 11.26 | | | | 4 | |
Total capital | | | 14.70 | | | | 14.86 | | | | (1) | | | | 14.70 | | | | 14.86 | | | | (1) | |
Tier 1 leverage (5) | | | 9.45 | | | | 8.97 | | | | 5 | | | | 9.45 | | | | 8.97 | | | | 5 | |
Tier 1 common equity (5)(6) | | | 10.06 | | | | 9.34 | | | | 8 | | | | 10.06 | | | | 9.34 | | | | 8 | |
Common shares outstanding | | | 5,289.6 | | | | 5,272.2 | | | | - | | | | 5,289.6 | | | | 5,272.2 | | | | - | |
Book value per common share | | $ | 27.10 | | | | 24.13 | | | | 12 | | | $ | 27.10 | | | | 24.13 | | | | 12 | |
Common stock price: | | | | | | | | | | | | | | | | | | | | | | | | |
High | | | 36.60 | | | | 29.63 | | | | 24 | | | | 36.60 | | | | 34.25 | | | | 7 | |
Low | | | 32.62 | | | | 22.58 | | | | 44 | | | | 27.94 | | | | 22.58 | | | | 24 | |
Period end | | | 34.53 | | | | 24.12 | | | | 43 | | | | 34.53 | | | | 24.12 | | | | 43 | |
Team members (active, full-time equivalent) | | | 267,000 | | | | 263,800 | | | | 1 | | | | 267,000 | | | | 263,800 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
| (1) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). |
| (2) | Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. |
| (3) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). |
| (4) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. |
| (5) | The September 30, 2012, ratios are preliminary. |
| (6) | See the “Five Quarter Tier 1 Common Equity Under Basel I” table for additional information. |
17
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA
| | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | Quarter ended | |
| | | | |
| ($ in millions, except per share amounts) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| | | | | |
For the Quarter | | | | | | | | | | | | | | | | | | | | |
Wells Fargo net income | | $ | 4,937 | | | | 4,622 | | | | 4,248 | | | | 4,107 | | | | 4,055 | |
Wells Fargo net income applicable to common stock | | | 4,717 | | | | 4,403 | | | | 4,022 | | | | 3,888 | | | | 3,839 | |
Diluted earnings per common share | | | 0.88 | | | | 0.82 | | | | 0.75 | | | | 0.73 | | | | 0.72 | |
Profitability ratios (annualized): | | | | | | | | | | | | | | | | | | | | |
Wells Fargo net income to average assets (ROA) | | | 1.45 | % | | | 1.41 | | | | 1.31 | | | | 1.25 | | | | 1.26 | |
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) | | | 13.38 | | | | 12.86 | | | | 12.14 | | | | 11.97 | | | | 11.86 | |
Efficiency ratio (1) | | | 57.1 | | | | 58.2 | | | | 60.1 | | | | 60.7 | | | | 59.5 | |
Total revenue | | $ | 21,213 | | | | 21,289 | | | | 21,636 | | | | 20,605 | | | | 19,628 | |
Pre-tax pre-provision profit (PTPP) (2) | | | 9,101 | | | | 8,892 | | | | 8,643 | | | | 8,097 | | | | 7,951 | |
Dividends declared per common share | | | 0.22 | | | | 0.22 | | | | 0.22 | | | | 0.12 | | | | 0.12 | |
Average common shares outstanding | | | 5,288.1 | | | | 5,306.9 | | | | 5,282.6 | | | | 5,271.9 | | | | 5,275.5 | |
Diluted average common shares outstanding | | | 5,355.6 | | | | 5,369.9 | | | | 5,337.8 | | | | 5,317.6 | | | | 5,319.2 | |
Average loans | | $ | 776,734 | | | | 768,223 | | | | 768,582 | | | | 768,563 | | | | 754,544 | |
Average assets | | | 1,354,340 | | | | 1,321,584 | | | | 1,302,921 | | | | 1,306,728 | | | | 1,281,369 | |
Average core deposits (3) | | | 895,374 | | | | 880,636 | | | | 870,516 | | | | 864,928 | | | | 836,845 | |
Average retail core deposits (4) | | | 630,053 | | | | 624,329 | | | | 616,569 | | | | 606,810 | | | | 599,227 | |
Net interest margin | | | 3.66 | % | | | 3.91 | | | | 3.91 | | | | 3.89 | | | | 3.84 | |
| | | | | |
At Quarter End | | | | | | | | | | | | | | | | | | | | |
Securities available for sale | | $ | 229,350 | | | | 226,846 | | | | 230,266 | | | | 222,613 | | | | 207,176 | |
Loans | | | 782,630 | | | | 775,199 | | | | 766,521 | | | | 769,631 | | | | 760,106 | |
Allowance for loan losses | | | 17,385 | | | | 18,320 | | | | 18,852 | | | | 19,372 | | | | 20,039 | |
Goodwill | | | 25,637 | | | | 25,406 | | | | 25,140 | | | | 25,115 | | | | 25,038 | |
Assets | | | 1,374,715 | | | | 1,336,204 | | | | 1,333,799 | | | | 1,313,867 | | | | 1,304,945 | |
Core deposits (3) | | | 901,075 | | | | 882,137 | | | | 888,711 | | | | 872,629 | | | | 849,632 | |
Wells Fargo stockholders’ equity | | | 154,679 | | | | 148,070 | | | | 145,516 | | | | 140,241 | | | | 137,768 | |
Total equity | | | 156,059 | | | | 149,437 | | | | 146,849 | | | | 141,687 | | | | 139,244 | |
Capital ratios: | | | | | | | | | | | | | | | | | | | | |
Total equity to assets | | | 11.35 | % | | | 11.18 | | | | 11.01 | | | | 10.78 | | | | 10.67 | |
Risk-based capital (5): | | | | | | | | | | | | | | | | | | | | |
Tier 1 capital | | | 11.66 | | | | 11.69 | | | | 11.78 | | | | 11.33 | | | | 11.26 | |
Total capital | | | 14.70 | | | | 14.85 | | | | 15.13 | | | | 14.76 | | | | 14.86 | |
Tier 1 leverage (5) | | | 9.45 | | | | 9.25 | | | | 9.35 | | | | 9.03 | | | | 8.97 | |
Tier 1 common equity (5)(6) | | | 10.06 | | | | 10.08 | | | | 9.98 | | | | 9.46 | | | | 9.34 | |
Common shares outstanding | | | 5,289.6 | | | | 5,275.7 | | | | 5,301.5 | | | | 5,262.6 | | | | 5,272.2 | |
Book value per common share | | $ | 27.10 | | | | 26.06 | | | | 25.45 | | | | 24.64 | | | | 24.13 | |
Common stock price: | | | | | | | | | | | | | | | | | | | | |
High | | | 36.60 | | | | 34.59 | | | | 34.59 | | | | 27.97 | | | | 29.63 | |
Low | | | 32.62 | | | | 29.80 | | | | 27.94 | | | | 22.61 | | | | 22.58 | |
Period end | | | 34.53 | | | | 33.44 | | | | 34.14 | | | | 27.56 | | | | 24.12 | |
Team members (active, full-time equivalent) | | | 267,000 | | | | 264,400 | | | | 264,900 | | | | 264,200 | | | | 263,800 | |
| | | | | | | | | | | | | | | | | | | | |
| |
| (1) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). |
| (2) | Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. |
| (3) | Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). |
| (4) | Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. |
| (5) | The September 30, 2012, ratios are preliminary. |
| (6) | See the “Five Quarter Tier 1 Common Equity under Basel I” table for additional information. |
18
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended Sept. 30, | | | % | | | Nine months
ended Sept. 30, | | | % | |
| | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | | 2012 | | | 2011 | | | Change | | | 2012 | | | 2011 | | | Change | |
| |
| | | | | | |
Interest income | | | | | | | | | | | | | | | | | | | | | | | | |
Trading assets | | $ | 299 | | | | 343 | | | | (13) | % | | $ | 1,019 | | | | 1,040 | | | | (2) | % |
Securities available for sale | | | 1,966 | | | | 2,053 | | | | (4) | | | | 6,201 | | | | 6,383 | | | | (3) | |
Mortgages held for sale | | | 476 | | | | 389 | | | | 22 | | | | 1,412 | | | | 1,188 | | | | 19 | |
Loans held for sale | | | 17 | | | | 13 | | | | 31 | | | | 38 | | | | 42 | | | | (10) | |
Loans | | | 9,016 | | | | 9,224 | | | | (2) | | | | 27,455 | | | | 27,972 | | | | (2) | |
Other interest income | | | 151 | | | | 156 | | | | (3) | | | | 409 | | | | 409 | | | | - | |
| | | | | | | | | | | | | |
| | | | | | |
Total interest income | | | 11,925 | | | | 12,178 | | | | (2) | | | | 36,534 | | | | 37,034 | | | | (1) | |
| | | | | | | | | | | | | |
| | | | | | |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | | 428 | | | | 559 | | | | (23) | | | | 1,328 | | | | 1,768 | | | | (25) | |
Short-term borrowings | | | 19 | | | | 20 | | | | (5) | | | | 55 | | | | 66 | | | | (17) | |
Long-term debt | | | 756 | | | | 980 | | | | (23) | | | | 2,375 | | | | 3,093 | | | | (23) | |
Other interest expense | | | 60 | | | | 77 | | | | (22) | | | | 189 | | | | 236 | | | | (20) | |
| | | | | | | | | | | | | |
| | | | | | |
Total interest expense | | | 1,263 | | | | 1,636 | | | | (23) | | | | 3,947 | | | | 5,163 | | | | (24) | |
| | | | | | | | | | | | | |
| | | | | | |
Net interest income | | | 10,662 | | | | 10,542 | | | | 1 | | | | 32,587 | | | | 31,871 | | | | 2 | |
Provision for credit losses | | | 1,591 | | | | 1,811 | | | | (12) | | | | 5,386 | | | | 5,859 | | | | (8) | |
| | | | | | | | | | | | | |
| | | | | | |
Net interest income after provision for credit losses | | | 9,071 | | | | 8,731 | | | | 4 | | | | 27,201 | | | | 26,012 | | | | 5 | |
| | | | | | | | | | | | | |
| | | | | | |
Noninterest income | | | | | | | | | | | | | | | | | | | | | | | | |
Service charges on deposit accounts | | | 1,210 | | | | 1,103 | | | | 10 | | | | 3,433 | | | | 3,189 | | | | 8 | |
Trust and investment fees | | | 2,954 | | | | 2,786 | | | | 6 | | | | 8,691 | | | | 8,646 | | | | 1 | |
Card fees | | | 744 | | | | 1,013 | | | | (27) | | | | 2,102 | | | | 2,973 | | | | (29) | |
Other fees | | | 1,097 | | | | 1,085 | | | | 1 | | | | 3,326 | | | | 3,097 | | | | 7 | |
Mortgage banking | | | 2,807 | | | | 1,833 | | | | 53 | | | | 8,570 | | | | 5,468 | | | | 57 | |
Insurance | | | 414 | | | | 423 | | | | (2) | | | | 1,455 | | | | 1,494 | | | | (3) | |
Net gains (losses) from trading activities | | | 529 | | | | (442) | | | | NM | | | | 1,432 | | | | 584 | | | | 145 | |
Net gains (losses) on debt securities available for sale | | | 3 | | | | 300 | | | | (99) | | | | (65) | | | | 6 | | | | NM | |
Net gains from equity investments | | | 164 | | | | 344 | | | | (52) | | | | 770 | | | | 1,421 | | | | (46) | |
Operating leases | | | 218 | | | | 284 | | | | (23) | | | | 397 | | | | 464 | | | | (14) | |
Other | | | 411 | | | | 357 | | | | 15 | | | | 1,440 | | | | 1,130 | | | | 27 | |
| | | | | | | | | | | | | |
| | | | | | |
Total noninterest income | | | 10,551 | | | | 9,086 | | | | 16 | | | | 31,551 | | | | 28,472 | | | | 11 | |
| | | | | | | | | | | | | |
| | | | | | |
Noninterest expense | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries | | | 3,648 | | | | 3,718 | | | | (2) | | | | 10,954 | | | | 10,756 | | | | 2 | |
Commission and incentive compensation | | | 2,368 | | | | 2,088 | | | | 13 | | | | 7,139 | | | | 6,606 | | | | 8 | |
Employee benefits | | | 1,063 | | | | 780 | | | | 36 | | | | 3,720 | | | | 3,336 | | | | 12 | |
Equipment | | | 510 | | | | 516 | | | | (1) | | | | 1,526 | | | | 1,676 | | | | (9) | |
Net occupancy | | | 727 | | | | 751 | | | | (3) | | | | 2,129 | | | | 2,252 | | | | (5) | |
Core deposit and other intangibles | | | 419 | | | | 466 | | | | (10) | | | | 1,256 | | | | 1,413 | | | | (11) | |
FDIC and other deposit assessments | | | 359 | | | | 332 | | | | 8 | | | | 1,049 | | | | 952 | | | | 10 | |
Other | | | 3,018 | | | | 3,026 | | | | - | | | | 9,729 | | | | 9,894 | | | | (2) | |
| | | | | | | | | | | | | |
| | | | | | |
Total noninterest expense | | | 12,112 | | | | 11,677 | | | | 4 | | | | 37,502 | | | | 36,885 | | | | 2 | |
| | | | | | | | | | | | | |
| | | | | | |
Income before income tax expense | | | 7,510 | | | | 6,140 | | | | 22 | | | | 21,250 | | | | 17,599 | | | | 21 | |
Income tax expense | | | 2,480 | | | | 1,998 | | | | 24 | | | | 7,179 | | | | 5,571 | | | | 29 | |
| | | | | | | | | | | | | |
| | | | | | |
Net income before noncontrolling interests | | | 5,030 | | | | 4,142 | | | | 21 | | | | 14,071 | | | | 12,028 | | | | 17 | |
| | | | | | |
Less: Net income from noncontrolling interests | | | 93 | | | | 87 | | | | 7 | | | | 264 | | | | 266 | | | | (1) | |
| | | | | | | | | | | | | |
| | | | | | |
Wells Fargo net income | | $ | 4,937 | | | | 4,055 | | | | 22 | | | $ | 13,807 | | | | 11,762 | | | | 17 | |
| | | | | | | | | | | | | |
Less: Preferred stock dividends and other | | | 220 | | | | 216 | | | | 2 | | | | 665 | | | | 625 | | | | 6 | |
| | | | | | | | | | | | | |
| | | | | | |
Wells Fargo net income applicable to common stock | | $ | 4,717 | | | | 3,839 | | | | 23 | | | $ | 13,142 | | | | 11,137 | | | | 18 | |
| | | | | | | | | | | | | |
| | | | | | |
Per share information | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per common share | | $ | 0.89 | | | | 0.73 | | | | 22 | | | $ | 2.48 | | | | 2.11 | | | | 18 | |
Diluted earnings per common share | | | 0.88 | | | | 0.72 | | | | 22 | | | | 2.45 | | | | 2.09 | | | | 17 | |
Dividends declared per common share | | | 0.22 | | | | 0.12 | | | | 83 | | | | 0.66 | | | | 0.36 | | | | 83 | |
Average common shares outstanding | | | 5,288.1 | | | | 5,275.5 | | | | - | | | | 5,292.7 | | | | 5,280.2 | | | | - | |
Diluted average common shares outstanding | | | 5,355.6 | | | | 5,319.2 | | | | 1 | | | | 5,355.7 | | | | 5,325.6 | | | | 1 | |
| | | | | | | | |
| |
NM - Not meaningful
19
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | | | | Nine months | | | | |
| | | Quarter ended Sept. 30, | | | % | | | ended Sept. 30, | | | % | |
| | | | | | | | | | | | | | | | |
(in millions) | | 2012 | | | 2011 | | | Change | | | 2012 | | | 2011 | | | Change | |
| |
Wells Fargo net income | | $ | 4,937 | | | | 4,055 | | | | 22 | % | | $ | 13,807 | | | | 11,762 | | | | 17 | % |
| | | | | | | | | | | | | |
Other comprehensive income, before tax: | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized gains (losses) arising during the period | | | 45 | | | | (58) | | | | NM | | | | (1) | | | | (29) | | | | (97 | ) |
Reclassification of net gains included in net income | | | - | | | | - | | | | - | | | | (10) | | | | - | | | | - | |
Securities available for sale: | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized gains (losses) arising during the period | | | 2,892 | | | | (2,007) | | | | NM | | | | 5,597 | | | | (878) | | | | NM | |
Reclassification of net gains included in net income | | | (41) | | | | (431) | | | | (90) | | | | (290) | | | | (614) | | | | (53 | ) |
Derivatives and hedging activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized gains arising during the period | | | 24 | | | | 68 | | | | (65) | | | | 63 | | | | 205 | | | | (69 | ) |
Reclassification of net gains on cash flow hedges included in net income | | | (89) | | | | (141) | | | | (37) | | | | (295) | | | | (454) | | | | (35 | ) |
Defined benefit plans adjustment: | | | | | | | | | | | | | | | | | | | | | | | | |
Net actuarial gains (losses) arising during the period | | | (1) | | | | 1 | | | | NM | | | | (18) | | | | (2) | | | | 800 | |
Amortization of net actuarial loss and prior service cost included in net income | | | 35 | | | | 23 | | | | 52 | | | | 111 | | | | 71 | | | | 56 | |
| | | | | | | | | | | | | |
| | | | | | |
Other comprehensive income (loss), before tax | | | 2,865 | | | | (2,545) | | | | NM | | | | 5,157 | | | | (1,701) | | | | NM | |
Income tax (expense) benefit related to OCI | | | (1,057) | | | | 945 | | | | NM | | | | (1,923) | | | | 781 | | | | NM | |
| | | | | | | | | | | | | |
| | | | | | |
Other comprehensive income (loss), net of tax | | | 1,808 | | | | (1,600) | | | | NM | | | | 3,234 | | | | (920) | | | | NM | |
Less: Other comprehensive income (loss) from noncontrolling interests | | | 2 | | | | (6) | | | | NM | | | | 6 | | | | (10) | | | | NM | |
| | | | | | | | | | | | | |
| | | | | | |
Wells Fargo other comprehensive income (loss), net of tax | | | 1,806 | | | | (1,594) | | | | NM | | | | 3,228 | | | | (910) | | | | NM | |
| | | | | | | | | | | | | |
| | | | | | |
Wells Fargo comprehensive income | | | 6,743 | | | | 2,461 | | | | 174 | | | | 17,035 | | | | 10,852 | | | | 57 | |
Comprehensive income from noncontrolling interests | | | 95 | | | | 81 | | | | 17 | | | | 270 | | | | 256 | | | | 5 | |
| | | | | | | | | | | | | |
| | | | | | |
Total comprehensive income | | $ | 6,838 | | | | 2,542 | | | | 169 | | | $ | 17,305 | | | | 11,108 | | | | 56 | |
| |
NM - Not meaningful
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
| | | | | | | | |
| |
| | | Nine months ended Sept. 30, | |
| | | | |
| (in millions) | | 2012 | | | 2011 | |
| |
| | |
Balance, beginning of period | | $ | 141,687 | | | | 127,889 | |
Cumulative effect of fair value election for certain residential mortgage servicing rights | | | 2 | | | | - | |
| |
| | |
Balance, beginning of period - adjusted | | | 141,689 | | | | 127,889 | |
Wells Fargo net income | | | 13,807 | | | | 11,762 | |
Wells Fargo other comprehensive income (loss), net of tax | | | 3,228 | | | | (910) | |
Common stock issued | | | 2,000 | | | | 1,014 | |
Common stock repurchased (1) | | | (2,597) | | | | (1,762) | |
Preferred stock released by ESOP | | | 838 | | | | 824 | |
Preferred stock issued | | | 742 | | | | 2,501 | |
Common stock warrants repurchased | | | - | | | | (1) | |
Common stock dividends | | | (3,500) | | | | (1,905) | |
Preferred stock dividends and other | | | (665) | | | | (625) | |
Noncontrolling interests and other, net | | | 517 | | | | 457 | |
| |
| | |
Balance, end of period | | $ | 156,059 | | | | 139,244 | |
| |
| (1) | For the nine months ended September 30, 2012, includes $300 million related to a private forward repurchase transaction entered into in third quarter 2012 that is expected to settle in fourth quarter 2012 for an estimated 9 million shares of common stock. |
20
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| | | Sept. 30, | | | June 30, | | | Mar. 31, | | | Dec. 31, | | | Sept. 30, | |
| (in millions, except per share amounts) | | 2012 | | | 2012 | | | 2012 | | | 2011 | | | 2011 | |
| |
| | | | | |
Interest income | | | | | | | | | | | | | | | | | | | | |
Trading assets | | $ | 299 | | | | 343 | | | | 377 | | | | 400 | | | | 343 | |
Securities available for sale | | | 1,966 | | | | 2,147 | | | | 2,088 | | | | 2,092 | | | | 2,053 | |
Mortgages held for sale | | | 476 | | | | 477 | | | | 459 | | | | 456 | | | | 389 | |
Loans held for sale | | | 17 | | | | 12 | | | | 9 | | | | 16 | | | | 13 | |
Loans | | | 9,016 | | | | 9,242 | | | | 9,197 | | | | 9,275 | | | | 9,224 | |
Other interest income | | | 151 | | | | 133 | | | | 125 | | | | 139 | | | | 156 | |
| |
| | | | | |
Total interest income | | | 11,925 | | | | 12,354 | | | | 12,255 | | | | 12,378 | | | | 12,178 | |
| |
| | | | | |
Interest expense | | | | | | | | | | | | | | | | | | | | |
Deposits | | | 428 | | | | 443 | | | | 457 | | | | 507 | | | | 559 | |
Short-term borrowings | | | 19 | | | | 20 | | | | 16 | | | | 14 | | | | 20 | |
Long-term debt | | | 756 | | | | 789 | | | | 830 | | | | 885 | | | | 980 | |
Other interest expense | | | 60 | | | | 65 | | | | 64 | | | | 80 | | | | 77 | |
| |
| | | | | |
Total interest expense | | | 1,263 | | | | 1,317 | | | | 1,367 | | | | 1,486 | | | | 1,636 | |
| |
| | | | | |
Net interest income | | | 10,662 | | | | 11,037 | | | | 10,888 | | | | 10,892 | | | | 10,542 | |
Provision for credit losses | | | 1,591 | | | | 1,800 | | | | 1,995 | | | | 2,040 | | | | 1,811 | |
| |
| | | | | |
Net interest income after provision for credit losses | | | 9,071 | | | | 9,237 | | | | 8,893 | | | | 8,852 | | | | 8,731 | |
| |
| | | | | |
Noninterest income | | | | | | | | | | | | | | | | | | | | |
Service charges on deposit accounts | | | 1,210 | | | | 1,139 | | | | 1,084 | | | | 1,091 | | | | 1,103 | |
Trust and investment fees | | | 2,954 | | | | 2,898 | | | | 2,839 | | | | 2,658 | | | | 2,786 | |
Card fees | | | 744 | | | | 704 | | | | 654 | | | | 680 | | | | 1,013 | |
Other fees | | | 1,097 | | | | 1,134 | | | | 1,095 | | | | 1,096 | | | | 1,085 | |
Mortgage banking | | | 2,807 | | | | 2,893 | | | | 2,870 | | | | 2,364 | | | | 1,833 | |
Insurance | | | 414 | | | | 522 | | | | 519 | | | | 466 | | | | 423 | |
Net gains (losses) from trading activities | | | 529 | | | | 263 | | | | 640 | | | | 430 | | | | (442) | |
Net gains (losses) on debt securities available for sale | | | 3 | | | | (61) | | | | (7) | | | | 48 | | | | 300 | |
Net gains from equity investments | | | 164 | | | | 242 | | | | 364 | | | | 61 | | | | 344 | |
Operating leases | | | 218 | | | | 120 | | | | 59 | | | | 60 | | | | 284 | |
Other | | | 411 | | | | 398 | | | | 631 | | | | 759 | | | | 357 | |
| |
| | | | | |
Total noninterest income | | | 10,551 | | | | 10,252 | | | | 10,748 | | | | 9,713 | | | | 9,086 | |
| |
| | | | | |
Noninterest expense | | | | | | | | | | | | | | | | | | | | |
Salaries | | | 3,648 | | | | 3,705 | | | | 3,601 | | | | 3,706 | | | | 3,718 | |
Commission and incentive compensation | | | 2,368 | | | | 2,354 | | | | 2,417 | | | | 2,251 | | | | 2,088 | |
Employee benefits | | | 1,063 | | | | 1,049 | | | | 1,608 | | | | 1,012 | | | | 780 | |
Equipment | | | 510 | | | | 459 | | | | 557 | | | | 607 | | | | 516 | |
Net occupancy | | | 727 | | | | 698 | | | | 704 | | | | 759 | | | | 751 | |
Core deposit and other intangibles | | | 419 | | | | 418 | | | | 419 | | | | 467 | | | | 466 | |
FDIC and other deposit assessments | | | 359 | | | | 333 | | | | 357 | | | | 314 | | | | 332 | |
Other | | | 3,018 | | | | 3,381 | | | | 3,330 | | | | 3,392 | | | | 3,026 | |
| |
| | | | | |
Total noninterest expense | | | 12,112 | | | | 12,397 | | | | 12,993 | | | | 12,508 | | | | 11,677 | |
| |
| | | | | |
Income before income tax expense | | | 7,510 | | | | 7,092 | | | | 6,648 | | | | 6,057 | | | | 6,140 | |
Income tax expense | | | 2,480 | | | | 2,371 | | | | 2,328 | | | | 1,874 | | | | 1,998 | |
| |
| | | | | |
Net income before noncontrolling interests | | | 5,030 | | | | 4,721 | | | | 4,320 | | | | 4,183 | | | | 4,142 | |
Less: Net income from noncontrolling interests | | | 93 | | | | 99 | | | | 72 | | | | 76 | | | | 87 | |
| |
| | | | | |
Wells Fargo net income | | $ | 4,937 | | | | 4,622 | | | | 4,248 | | | | 4,107 | | | | 4,055 | |
| |
| | | | | |
Less: Preferred stock dividends and other | | | 220 | | | | 219 | | | | 226 | | | | 219 | | | | 216 | |
| |
| | | | | |
Wells Fargo net income applicable to common stock | | $ | 4,717 | | | | 4,403 | | | | 4,022 | | | | 3,888 | | | | 3,839 | |
| |
| | | | | |
Per share information | | | | | | | | | | | | | | | | | | | | |
Earnings per common share | | $ | 0.89 | | | | 0.83 | | | | 0.76 | | | | 0.74 | | | | 0.73 | |
Diluted earnings per common share | | | 0.88 | | | | 0.82 | | | | 0.75 | | | | 0.73 | | | | 0.72 | |
Dividends declared per common share | | | 0.22 | | | | 0.22 | | | | 0.22 | | | | 0.12 | | | | 0.12 | |
Average common shares outstanding | | | 5,288.1 | | | | 5,306.9 | | | | 5,282.6 | | | | 5,271.9 | | | | 5,275.5 | |
Diluted average common shares outstanding | | | 5,355.6 | | | | 5,369.9 | | | | 5,337.8 | | | | 5,317.6 | | | | 5,319.2 | |
| | | | | | | | | | | | | | | | | | | | |
| |
21
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter ended September 30, | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2012 | | | | | 2011 | |
| (in millions) | | Average
balance | | | Yields/
rates | | | | | | Interest
income/
expense | | | | | Average
balance | | | Yields/
rates | | | | | | Interest
income/
expense | |
| |
| | | | | | | | | |
Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal funds sold, securities purchased under resale agreements and other short-term investments | | $ | 91,561 | | | | 0.44 | | | | % | | | $ | 101 | | | | | | 98,909 | | | | 0.42 | | | | % | | | $ | 105 | |
Trading assets | | | 39,441 | | | | 3.08 | | | | | | | | 304 | | | | | | 37,939 | | | | 3.67 | | | | | | | | 348 | |
Securities available for sale (3): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities of U.S. Treasury and federal agencies | | | 1,390 | | | | 1.05 | | | | | | | | 4 | | | | | | 9,578 | | | | 1.02 | | | | | | | | 24 | |
Securities of U.S. states and political subdivisions | | | 35,925 | | | | 4.36 | | | | | | | | 392 | | | | | | 25,593 | | | | 4.93 | | | | | | | | 315 | |
Mortgage-backed securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal agencies | | | 94,324 | | | | 2.88 | | | | | | | | 679 | | | | | | 72,887 | | | | 4.41 | | | | | | | | 804 | |
Residential and commercial | | | 33,124 | | | | 6.67 | | | | | | | | 553 | | | | | | 32,625 | | | | 7.46 | | | | | | | | 609 | |
Total mortgage-backed securities | | | 127,448 | | | | 3.87 | | | | | | | | 1,232 | | | | | | 105,512 | | | | 5.36 | | | | | | | | 1,413 | |
Other debt and equity securities | | | 47,647 | | | | 4.07 | | | | | | | | 486 | | | | | | 38,888 | | | | 4.69 | | | | | | | | 457 | |
| | | | | | | | | |
Total securities available for sale | | | 212,410 | | | | 3.98 | | | | | | | | 2,114 | | | | | | 179,571 | | | | 4.92 | | | | | | | | 2,209 | |
Mortgages held for sale (4) | | | 52,128 | | | | 3.65 | | | | | | | | 476 | | | | | | 34,634 | | | | 4.49 | | | | | | | | 389 | |
Loans held for sale (4) | | | 932 | | | | 7.38 | | | | | | | | 17 | | | | | | 968 | | | | 5.21 | | | | | | | | 13 | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | �� | | | | | | | | | | | | | | | |
Commercial and industrial | | | 177,500 | | | | 3.84 | | | | | | | | 1,711 | | | | | | 159,625 | | | | 4.22 | | | | | | | | 1,697 | |
Real estate mortgage | | | 105,148 | | | | 4.05 | | | | | | | | 1,070 | | | | | | 102,428 | | | | 3.93 | | | | | | | | 1,015 | |
Real estate construction | | | 17,687 | | | | 5.21 | | | | | | | | 232 | | | | | | 20,537 | | | | 6.12 | | | | | | | | 317 | |
Lease financing | | | 12,608 | | | | 6.60 | | | | | | | | 208 | | | | | | 12,964 | | | | 7.21 | | | | | | | | 234 | |
Foreign | | | 39,663 | | | | 2.46 | | | | | | | | 245 | | | | | | 38,175 | | | | 2.42 | | | | | | | | 233 | |
| | | | | | | | | |
Total commercial | | | 352,606 | | | | 3.91 | | | | | | | | 3,466 | | | | | | 333,729 | | | | 4.16 | | | | | | | | 3,496 | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 234,020 | | | | 4.51 | | | | | | | | 2,638 | | | | | | 223,765 | | | | 4.83 | | | | | | | | 2,704 | |
Real estate 1-4 family junior lien mortgage | | | 79,718 | | | | 4.26 | | | | | | | | 854 | | | | | | 89,065 | | | | 4.37 | | | | | | | | 980 | |
Credit card | | | 23,040 | | | | 12.64 | | | | | | | | 732 | | | | | | 21,452 | | | | 12.96 | | | | | | | | 695 | |
Other revolving credit and installment | | | 87,350 | | | | 6.08 | | | | | | | | 1,334 | | | | | | 86,533 | | | | 6.25 | | | | | | | | 1,364 | |
| | | | | | | | | |
Total consumer | | | 424,128 | | | | 5.23 | | | | | | | | 5,558 | | | | | | 420,815 | | | | 5.44 | | | | | | | | 5,743 | |
| | | | | | | | | |
Total loans (4) | | | 776,734 | | | | 4.63 | | | | | | | | 9,024 | | | | | | 754,544 | | | | 4.87 | | | | | | | | 9,239 | |
Other | | | 4,386 | | | | 4.62 | | | | | | | | 50 | | | | | | 4,831 | | | | 4.18 | | | | | | | | 50 | |
| | | | | | | | | |
Total earning assets | | $ | 1,177,592 | | | | 4.09 | | | | % | | | $ | 12,086 | | | | | | 1,111,396 | | | | 4.43 | | | | % | | | $ | 12,353 | |
| | | | | | | | | |
Funding sources | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing checking | | $ | 28,815 | | | | 0.06 | | | | % | | | $ | 4 | | | | | | 43,986 | | | | 0.07 | | | | % | | | $ | 8 | |
Market rate and other savings | | | 506,138 | | | | 0.12 | | | | | | | | 152 | | | | | | 473,409 | | | | 0.17 | | | | | | | | 198 | |
Savings certificates | | | 58,206 | | | | 1.29 | | | | | | | | 188 | | | | | | 67,633 | | | | 1.47 | | | | | | | | 251 | |
Other time deposits | | | 14,373 | | | | 1.49 | | | | | | | | 54 | | | | | | 12,809 | | | | 2.02 | | | | | | | | 65 | |
Deposits in foreign offices | | | 71,791 | | | | 0.16 | | | | | | | | 30 | | | | | | 63,548 | | | | 0.23 | | | | | | | | 37 | |
| | | | | | | | | |
Total interest-bearing deposits | | | 679,323 | | | | 0.25 | | | | | | | | 428 | | | | | | 661,385 | | | | 0.34 | | | | | | | | 559 | |
Short-term borrowings | | | 51,857 | | | | 0.17 | | | | | | | | 22 | | | | | | 50,373 | | | | 0.18 | | | | | | | | 23 | |
Long-term debt | | | 127,486 | | | | 2.37 | | | | | | | | 756 | | | | | | 139,542 | | | | 2.81 | | | | | | | | 980 | |
Other liabilities | | | 9,945 | | | | 2.40 | | | | | | | | 60 | | | | | | 11,170 | | | | 2.75 | | | | | | | | 77 | |
| | | | | | | | | |
Total interest-bearing liabilities | | | 868,611 | | | | 0.58 | | | | | | | | 1,266 | | | | | | 862,470 | | | | 0.76 | | | | | | | | 1,639 | |
Portion of noninterest-bearing funding sources | | | 308,981 | | | | - | | | | | | | | - | | | | | | 248,926 | | | | - | | | | | | | | - | |
| | | | | | | | | |
Total funding sources | | $ | 1,177,592 | | | | 0.43 | | | | | | | | 1,266 | | | | | | 1,111,396 | | | | 0.59 | | | | | | | | 1,639 | |
| | | | | | | | | |
Net interest margin and net interest income on a taxable-equivalent basis (5) | | | | | | | 3.66 | | | | % | | | $ | 10,820 | | | | | | | | | | 3.84 | | | | % | | | $ | 10,714 | |
Noninterest-earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 15,682 | | | | | | | | | | | | | | | | | | 17,101 | | | | | | | | | | | | | |
Goodwill | | | 25,566 | | | | | | | | | | | | | | | | | | 25,008 | | | | | | | | | | | | | |
Other | | | 135,500 | | | | | | | | | | | | | | | | | | 127,864 | | | | | | | | | | | | | |
| | | | | | | | | |
Total noninterest-earning assets | | $ | 176,748 | | | | | | | | | | | | | | | | | | 169,973 | | | | | | | | | | | | | |
| | | | | | | | | |
Noninterest-bearing funding sources | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | $ | 267,184 | | | | | | | | | | | | | | | | | | 221,182 | | | | | | | | | | | | | |
Other liabilities | | | 66,116 | | | | | | | | | | | | | | | | | | 57,464 | | | | | | | | | | | | | |
Total equity | | | 152,429 | | | | | | | | | | | | | | | | | | 140,253 | | | | | | | | | | | | | |
Noninterest-bearing funding sources used to fund earning assets | | | (308,981 | ) | | | | | | | | | | | | | | | | | (248,926 | ) | | | | | | | | | | | | |
Net noninterest-bearing funding sources | | $ | 176,748 | | | | | | | | | | | | | | | | | | 169,973 | | | | | | | | | | | | | |
| | | | | | | | | |
Total assets | | $ | 1,354,340 | | | | | | | | | | | | | | | | | | 1,281,369 | | | | | | | | | | | | | |
| (1) | Our average prime rate was 3.25% for the quarters ended September 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.43% and 0.30% for the same quarters, respectively. |
| (2) | Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories. |
| (3) | Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented. |
| (4) | Nonaccrual loans and related income are included in their respective loan categories. |
| (5) | Includes taxable-equivalent adjustments of $158 million and $172 million for the quarters ended September 30, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. |
22
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | |
| | | | | | | | Nine months ended September 30, | |
| | | | |
| | | 2012 | | | | | 2011 | |
| (in millions) | | Average
balance | | | Yields/
rates | | | | | | Interest
income/
expense | | | | | Average
balance | | | Yields/
rates | | | | | | Interest
income/
expense | |
| |
| | | | | | | | | |
Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal funds sold, securities purchased under resale agreements and other short-term investments | | $ | 73,011 | | | | 0.47 | | | | % | | | $ | 257 | | | | | | 93,661 | | | | 0.37 | | | | % | | | $ | 257 | |
Trading assets | | | 41,931 | | | | 3.29 | | | | | | | | 1,035 | | | | | | 37,788 | | | | 3.73 | | | | | | | | 1,056 | |
Securities available for sale (3): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities of U.S. Treasury and federal agencies | | | 3,041 | | | | 1.12 | | | | | | | | 25 | | | | | | 4,423 | | | | 1.43 | | | | | | | | 47 | |
Securities of U.S. states and political subdivisions | | | 34,366 | | | | 4.42 | | | | | | | | 1,139 | | | | | | 22,694 | | | | 5.21 | | | | | | | | 887 | |
Mortgage-backed securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal agencies | | | 93,555 | | | | 3.24 | | | | | | | | 2,277 | | | | | | 71,408 | | | | 4.63 | | | | | | | | 2,480 | |
Residential and commercial | | | 33,839 | | | | 6.82 | | | | | | | | 1,731 | | | | | | 30,954 | | | | 8.64 | | | | | | | | 2,005 | |
| | | | | | | | | |
Total mortgage-backed securities | | | 127,394 | | | | 4.19 | | | | | | | | 4,008 | | | | | | 102,362 | | | | 5.84 | | | | | | | | 4,485 | |
Other debt and equity securities | | | 48,983 | | | | 4.09 | | | | | | | | 1,501 | | | | | | 35,709 | | | | 5.32 | | | | | | | | 1,423 | |
| | | | | | | | | |
Total securities available for sale | | | 213,784 | | | | 4.16 | | | | | | | | 6,673 | | | | | | 165,188 | | | | 5.52 | | | | | | | | 6,842 | |
Mortgages held for sale (4) | | | 49,531 | | | | 3.80 | | | | | | | | 1,412 | | | | | | 34,668 | | | | 4.57 | | | | | | | | 1,188 | |
Loans held for sale (4) | | | 838 | | | | 6.07 | | | | | | | | 38 | | | | | | 1,100 | | | | 5.05 | | | | | | | | 42 | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 172,039 | | | | 4.07 | | | | | | | | 5,245 | | | | | | 154,469 | | | | 4.48 | | | | | | | | 5,181 | |
Real estate mortgage | | | 105,548 | | | | 4.24 | | | | | | | | 3,350 | | | | | | 101,230 | | | | 4.00 | | | | | | | | 3,033 | |
Real estate construction | | | 18,118 | | | | 4.98 | | | | | | | | 676 | | | | | | 22,255 | | | | 4.96 | | | | | | | | 826 | |
Lease financing | | | 12,875 | | | | 7.47 | | | | | | | | 721 | | | | | | 12,961 | | | | 7.59 | | | | | | | | 737 | |
Foreign | | | 39,915 | | | | 2.52 | | | | | | | | 753 | | | | | | 36,103 | | | | 2.62 | | | | | | | | 708 | |
| | | | | | | | | |
Total commercial | | | 348,495 | | | | 4.12 | | | | | | | | 10,745 | | | | | | 327,018 | | | | 4.28 | | | | | | | | 10,485 | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 231,256 | | | | 4.60 | | | | | | | | 7,984 | | | | | | 226,048 | | | | 4.93 | | | | | | | | 8,363 | |
Real estate 1-4 family junior lien mortgage | | | 82,161 | | | | 4.28 | | | | | | | | 2,631 | | | | | | 91,881 | | | | 4.32 | | | | | | | | 2,973 | |
Credit card | | | 22,414 | | | | 12.75 | | | | | | | | 2,140 | | | | | | 21,305 | | | | 13.04 | | | | | | | | 2,084 | |
Other revolving credit and installment | | | 86,874 | | | | 6.12 | | | | | | | | 3,980 | | | | | | 87,041 | | | | 6.31 | | | | | | | | 4,107 | |
| | | | | | | | | |
Total consumer | | | 422,705 | | | | 5.28 | | | | | | | | 16,735 | | | | | | 426,275 | | | | 5.49 | | | | | | | | 17,527 | |
| | | | | | | | | |
Total loans (4) | | | 771,200 | | | | 4.76 | | | | | | | | 27,480 | | | | | | 753,293 | | | | 4.97 | | | | | | | | 28,012 | |
Other | | | 4,492 | | | | 4.53 | | | | | | | | 153 | | | | | | 5,017 | | | | 4.06 | | | | | | | | 153 | |
Total earning assets | | $ | 1,154,787 | | | | 4.28 | | | | % | | | $ | 37,048 | | | | | | 1,090,715 | | | | 4.59 | | | | % | | | $ | 37,550 | |
| | | | | | | | | |
Funding sources | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing checking | | $ | 30,465 | | | | 0.06 | | | | % | | | $ | 14 | | | | | | 51,891 | | | | 0.09 | | | | % | | | $ | 34 | |
Market rate and other savings | | | 500,850 | | | | 0.12 | | | | | | | | 457 | | | | | | 457,483 | | | | 0.19 | | | | | | | | 661 | |
Savings certificates | | | 60,404 | | | | 1.33 | | | | | | | | 601 | | | | | | 71,343 | | | | 1.43 | | | | | | | | 762 | |
Other time deposits | | | 13,280 | | | | 1.74 | | | | | | | | 173 | | | | | | 13,212 | | | | 2.10 | | | | | | | | 208 | |
Deposits in foreign offices | | | 67,424 | | | | 0.16 | | | | | | | | 83 | | | | | | 59,662 | | | | 0.23 | | | | | | | | 103 | |
| | | | | | | | | |
Total interest-bearing deposits | | | 672,423 | | | | 0.26 | | | | | | | | 1,328 | | | | | | 653,591 | | | | 0.36 | | | | | | | | 1,768 | |
Short-term borrowings | | | 50,650 | | | | 0.17 | | | | | | | | 65 | | | | | | 52,805 | | | | 0.19 | | | | | | | | 77 | |
Long-term debt | | | 127,561 | | | | 2.48 | | | | | | | | 2,375 | | | | | | 145,000 | | | | 2.85 | | | | | | | | 3,093 | |
Other liabilities | | | 10,052 | | | | 2.50 | | | | | | | | 189 | | | | | | 10,547 | | | | 2.99 | | | | | | | | 236 | |
| | | | | | | | | |
Total interest-bearing liabilities | | | 860,686 | | | | 0.61 | | | | | | | | 3,957 | | | | | | 861,943 | | | | 0.80 | | | | | | | | 5,174 | |
Portion of noninterest-bearing funding sources | | | 294,101 | | | | - | | | | | | | | - | | | | | | 228,772 | | | | - | | | | | | | | - | |
| | | | | | | | | |
Total funding sources | | $ | 1,154,787 | | | | 0.46 | | | | | | | | 3,957 | | | | | | 1,090,715 | | | | 0.63 | | | | | | | | 5,174 | |
| | | | | | | | | |
Net interest margin and net interest income on a taxable-equivalent basis (5) | | | | | | | 3.82 | | | | % | | | $ | 33,091 | | | | | | | | | | 3.96 | | | | % | | | $ | 32,376 | |
Noninterest-earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 16,283 | | | | | | | | | | | | | | | | | | 17,277 | | | | | | | | | | | | | |
Goodwill | | | 25,343 | | | | | | | | | | | | | | | | | | 24,853 | | | | | | | | | | | | | |
Other | | | 129,971 | | | | | | | | | | | | | | | | | | 125,132 | | | | | | | | | | | | | |
| | | | | | | | | |
Total noninterest-earning assets | | $ | 171,597 | | | | | | | | | | | | | | | | | | 167,262 | | | | | | | | | | | | | |
| | | | | | | | | |
Noninterest-bearing funding sources | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | $ | 256,120 | | | | | | | | | | | | | | | | | | 204,643 | | | | | | | | | | | | | |
Other liabilities | | | 60,606 | | | | | | | | | | | | | | | | | | 55,324 | | | | | | | | | | | | | |
Total equity | | | 148,972 | | | | | | | | | | | | | | | | | | 136,067 | | | | | | | | | | | | | |
Noninterest-bearing funding sources used to fund earning assets | | | (294,101 | ) | | | | | | | | | | | | | | | | | (228,772 | ) | | | | | | | | | | | | |
| | | | | | | | | |
Net noninterest-bearing funding sources | | $ | 171,597 | | | | | | | | | | | | | | | | | | 167,262 | | | | | | | | | | | | | |
| | | | | | | | | |
Total assets | | $ | 1,326,384 | | | | | | | | | | | | | | | | | | 1,257,977 | | | | | | | | | | | | | |
| (1) | Our average prime rate was 3.25% for the nine months ended September 30, 2012 and 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.47% and 0.29% for the same periods, respectively. |
| (2) | Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories. |
| (3) | Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented. |
| (4) | Nonaccrual loans and related income are included in their respective loan categories. |
| (5) | Includes taxable-equivalent adjustments of $504 million and $505 million for the nine months ended September 30, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. |
23
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | | |
| | | Quarter ended Sept. 30, | | | % | | | Nine months ended
Sept. 30, | | | % | |
| | | | | | | | | | | | | | | | |
| | | | | | |
| (in millions) | | 2012 | | | 2011 | | | Change | | | 2012 | | | 2011 | | | Change | |
| |
| | | | | | |
Service charges on deposit accounts | | $ | 1,210 | | | | 1,103 | | | | 10 | % | | $ | 3,433 | | | | 3,189 | | | | 8 | % |
Trust and investment fees: | | | | | | | | | | | | | | | | | | | | | | | | |
Trust, investment and IRA fees | | | 1,062 | | | | 1,019 | | | | 4 | | | | 3,127 | | | | 3,099 | | | | 1 | |
Commissions and all other fees | | | 1,892 | | | | 1,767 | | | | 7 | | | | 5,564 | | | | 5,547 | | | | - | |
| | | | | | | | | | | | | |
| | | | | | |
Total trust and investment fees | | | 2,954 | | | | 2,786 | | | | 6 | | | | 8,691 | | | | 8,646 | | | | 1 | |
| | | | | | | | | | | | | |
| | | | | | |
Card fees | | | 744 | | | | 1,013 | | | | (27) | | | | 2,102 | | | | 2,973 | | | | (29) | |
Other fees: | | | | | | | | | | | | | | | | | | | | | | | | |
Cash network fees | | | 121 | | | | 105 | | | | 15 | | | | 359 | | | | 280 | | | | 28 | |
Charges and fees on loans | | | 426 | | | | 438 | | | | (3) | | | | 1,298 | | | | 1,239 | | | | 5 | |
Processing and all other fees | | | 550 | | | | 542 | | | | 1 | | | | 1,669 | | | | 1,578 | | | | 6 | |
| | | | | | | | | | | | | |
| | | | | | |
Total other fees | | | 1,097 | | | | 1,085 | | | | 1 | | | | 3,326 | | | | 3,097 | | | | 7 | |
| | | | | | | | | | | | | |
| | | | | | |
Mortgage banking: | | | | | | | | | | | | | | | | | | | | | | | | |
Servicing income, net | | | 197 | | | | 1,030 | | | | (81) | | | | 1,128 | | | | 2,773 | | | | (59) | |
Net gains on mortgage loan origination/sales activities | | | 2,610 | | | | 803 | | | | 225 | | | | 7,442 | | | | 2,695 | | | | 176 | |
| | | | | | | | | | | | | |
| | | | | | |
Total mortgage banking | | | 2,807 | | | | 1,833 | | | | 53 | | | | 8,570 | | | | 5,468 | | | | 57 | |
| | | | | | | | | | | | | |
| | | | | | |
Insurance | | | 414 | | | | 423 | | | | (2) | | | | 1,455 | | | | 1,494 | | | | (3) | |
Net gains (losses) from trading activities | | | 529 | | | | (442) | | | | NM | | | | 1,432 | | | | 584 | | | | 145 | |
Net gains (losses) on debt securities available for sale | | | 3 | | | | 300 | | | | (99) | | | | (65) | | | | 6 | | | | NM | |
Net gains from equity investments | | | 164 | | | | 344 | | | | (52) | | | | 770 | | | | 1,421 | | | | (46) | |
Operating leases | | | 218 | | | | 284 | | | | (23) | | | | 397 | | | | 464 | | | | (14) | |
All other | | | 411 | | | | 357 | | | | 15 | | | | 1,440 | | | | 1,130 | | | | 27 | |
| | | | | | | | | | | | | |
| | | | | | |
Total | | $ | 10,551 | | | | 9,086 | | | | 16 | | | $ | 31,551 | | | | 28,472 | | | | 11 | |
| |
NM - Not meaningful | | | | | | | | | | | | | | | | | | | | | | | | |
|
| NONINTEREST EXPENSE | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | Quarter ended Sept. 30, | | | % | | | Nine months ended
Sept. 30, | | | % | |
| | | | | | | | | | | | | | | | |
| | | | | | |
| (in millions) | | 2012 | | | 2011 | | | Change | | | 2012 | | | 2011 | | | Change | |
| |
| | | | | | |
Salaries | | $ | 3,648 | | | | 3,718 | | | | (2) | % | | $ | 10,954 | | | | 10,756 | | | | 2 | % |
Commission and incentive compensation | | | 2,368 | | | | 2,088 | | | | 13 | | | | 7,139 | | | | 6,606 | | | | 8 | |
Employee benefits | | | 1,063 | | | | 780 | | | | 36 | | | | 3,720 | | | | 3,336 | | | | 12 | |
Equipment | | | 510 | | | | 516 | | | | (1) | | | | 1,526 | | | | 1,676 | | | | (9) | |
Net occupancy | | | 727 | | | | 751 | | | | (3) | | | | 2,129 | | | | 2,252 | | | | (5) | |
Core deposit and other intangibles | | | 419 | | | | 466 | | | | (10) | | | | 1,256 | | | | 1,413 | | | | (11) | |
FDIC and other deposit assessments | | | 359 | | | | 332 | | | | 8 | | | | 1,049 | | | | 952 | | | | 10 | |
Outside professional services | | | 733 | | | | 640 | | | | 15 | | | | 1,985 | | | | 1,879 | | | | 6 | |
Contract services | | | 237 | | | | 341 | | | | (30) | | | | 776 | | | | 1,051 | | | | (26) | |
Foreclosed assets | | | 247 | | | | 271 | | | | (9) | | | | 840 | | | | 984 | | | | (15) | |
Operating losses | | | 281 | | | | 198 | | | | 42 | | | | 1,282 | | | | 1,098 | | | | 17 | |
Postage, stationery and supplies | | | 196 | | | | 240 | | | | (18) | | | | 607 | | | | 711 | | | | (15) | |
Outside data processing | | | 234 | | | | 226 | | | | 4 | | | | 683 | | | | 678 | | | | 1 | |
Travel and entertainment | | | 208 | | | | 198 | | | | 5 | | | | 628 | | | | 609 | | | | 3 | |
Advertising and promotion | | | 170 | | | | 159 | | | | 7 | | | | 436 | | | | 441 | | | | (1) | |
Telecommunications | | | 127 | | | | 128 | | | | (1) | | | | 378 | | | | 394 | | | | (4) | |
Insurance | | | 51 | | | | 94 | | | | (46) | | | | 391 | | | | 428 | | | | (9) | |
Operating leases | | | 27 | | | | 29 | | | | (7) | | | | 82 | | | | 84 | | | | (2) | |
All other | | | 507 | | | | 502 | | | | 1 | | | | 1,641 | | | | 1,537 | | | | 7 | |
| | | | | | | | | | | | | |
| | | | | | |
Total | | $ | 12,112 | | | | 11,677 | | | | 4 | | | $ | 37,502 | | | | 36,885 | | | | 2 | |
| |
24
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
| | | | | | | | | | | | | | | | | | | | |
| |
| |
| | | Quarter ended | |
| | | | |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Service charges on deposit accounts | | $ | 1,210 | | | | 1,139 | | | | 1,084 | | | | 1,091 | | | | 1,103 | |
Trust and investment fees: | | | | | | | | | | | | | | | | | | | | |
Trust, investment and IRA fees | | | 1,062 | | | | 1,041 | | | | 1,024 | | | | 1,000 | | | | 1,019 | |
Commissions and all other fees | | | 1,892 | | | | 1,857 | | | | 1,815 | | | | 1,658 | | | | 1,767 | |
| |
| | | | | |
Total trust and investment fees | | | 2,954 | | | | 2,898 | | | | 2,839 | | | | 2,658 | | | | 2,786 | |
| |
| | | | | |
Card fees | | | 744 | | | | 704 | | | | 654 | | | | 680 | | | | 1,013 | |
Other fees: | | | | | | | | | | | | | | | | | | | | |
Cash network fees | | | 121 | | | | 120 | | | | 118 | | | | 109 | | | | 105 | |
Charges and fees on loans | | | 426 | | | | 427 | | | | 445 | | | | 402 | | | | 438 | |
Processing and all other fees | | | 550 | | | | 587 | | | | 532 | | | | 585 | | | | 542 | |
| |
| | | | | |
Total other fees | | | 1,097 | | | | 1,134 | | | | 1,095 | | | | 1,096 | | | | 1,085 | |
| |
| | | | | |
Mortgage banking: | | | | | | | | | | | | | | | | | | | | |
Servicing income, net | | | 197 | | | | 679 | | | | 252 | | | | 493 | | | | 1,030 | |
Net gains on mortgage loan origination/sales activities | | | 2,610 | | | | 2,214 | | | | 2,618 | | | | 1,871 | | | | 803 | |
| |
| | | | | |
Total mortgage banking | | | 2,807 | | | | 2,893 | | | | 2,870 | | | | 2,364 | | | | 1,833 | |
| |
| | | | | |
Insurance | | | 414 | | | | 522 | | | | 519 | | | | 466 | | | | 423 | |
Net gains (losses) from trading activities | | | 529 | | | | 263 | | | | 640 | | | | 430 | | | | (442) | |
Net gains (losses) on debt securities available for sale | | | 3 | | | | (61) | | | | (7) | | | | 48 | | | | 300 | |
Net gains from equity investments | | | 164 | | | | 242 | | | | 364 | | | | 61 | | | | 344 | |
Operating leases | | | 218 | | | | 120 | | | | 59 | | | | 60 | | | | 284 | |
All other | | | 411 | | | | 398 | | | | 631 | | | | 759 | | | | 357 | |
| |
| | | | | |
Total | | $ | 10,551 | | | | 10,252 | | | | 10,748 | | | | 9,713 | | | | 9,086 | |
| |
|
| FIVE QUARTER NONINTEREST EXPENSE | |
| |
| |
| | | Quarter ended | |
| | | | |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Salaries | | $ | 3,648 | | | | 3,705 | | | | 3,601 | | | | 3,706 | | | | 3,718 | |
Commission and incentive compensation | | | 2,368 | | | | 2,354 | | | | 2,417 | | | | 2,251 | | | | 2,088 | |
Employee benefits | | | 1,063 | | | | 1,049 | | | | 1,608 | | | | 1,012 | | | | 780 | |
Equipment | | | 510 | | | | 459 | | | | 557 | | | | 607 | | | | 516 | |
Net occupancy | | | 727 | | | | 698 | | | | 704 | | | | 759 | | | | 751 | |
Core deposit and other intangibles | | | 419 | | | | 418 | | | | 419 | | | | 467 | | | | 466 | |
FDIC and other deposit assessments | | | 359 | | | | 333 | | | | 357 | | | | 314 | | | | 332 | |
Outside professional services | | | 733 | | | | 658 | | | | 594 | | | | 813 | | | | 640 | |
Contract services | | | 237 | | | | 236 | | | | 303 | | | | 356 | | | | 341 | |
Foreclosed assets | | | 247 | | | | 289 | | | | 304 | | | | 370 | | | | 271 | |
Operating losses | | | 281 | | | | 524 | | | | 477 | | | | 163 | | | | 198 | |
Postage, stationery and supplies | | | 196 | | | | 195 | | | | 216 | | | | 231 | | | | 240 | |
Outside data processing | | | 234 | | | | 233 | | | | 216 | | | | 257 | | | | 226 | |
Travel and entertainment | | | 208 | | | | 218 | | | | 202 | | | | 212 | | | | 198 | |
Advertising and promotion | | | 170 | | | | 144 | | | | 122 | | | | 166 | | | | 159 | |
Telecommunications | | | 127 | | | | 127 | | | | 124 | | | | 129 | | | | 128 | |
Insurance | | | 51 | | | | 183 | | | | 157 | | | | 87 | | | | 94 | |
Operating leases | | | 27 | | | | 27 | | | | 28 | | | | 28 | | | | 29 | |
All other | | | 507 | | | | 547 | | | | 587 | | | | 580 | | | | 502 | |
| |
| | | | | |
Total | | $ | 12,112 | | | | 12,397 | | | | 12,993 | | | | 12,508 | | | | 11,677 | |
| |
25
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
| | | | | | | | | | | | |
| |
| | | |
| (in millions, except shares) | | Sept. 30,
2012 | | | Dec. 31,
2011 | | | %
Change | |
| |
| | | |
Assets | | | | | | | | | | | | |
Cash and due from banks | | $ | 16,986 | | | | 19,440 | | | | (13) | % |
Federal funds sold, securities purchased under resale agreements and other short-term investments | | | 100,442 | | | | 44,367 | | | | 126 | |
Trading assets | | | 60,592 | | | | 77,814 | | | | (22) | |
Securities available for sale | | | 229,350 | | | | 222,613 | | | | 3 | |
Mortgages held for sale (includes $46,575 and $44,791 carried at fair value) | | | 50,337 | | | | 48,357 | | | | 4 | |
Loans held for sale (includes $172 and $1,176 carried at fair value) | | | 298 | | | | 1,338 | | | | (78) | |
| | | |
Loans (includes $6,188 and $5,916 carried at fair value) | | | 782,630 | | | | 769,631 | | | | 2 | |
Allowance for loan losses | | | (17,385) | | | | (19,372) | | | | (10) | |
| | | | | |
| | | |
Net loans | | | 765,245 | | | | 750,259 | | | | 2 | |
| | | | | |
| | | |
Mortgage servicing rights: | | | | | | | | | | | | |
Measured at fair value | | | 10,956 | | | | 12,603 | | | | (13) | |
Amortized | | | 1,144 | | | | 1,408 | | | | (19) | |
Premises and equipment, net | | | 9,165 | | | | 9,531 | | | | (4) | |
Goodwill | | | 25,637 | | | | 25,115 | | | | 2 | |
Other assets | | | 104,563 | | | | 101,022 | | | | 4 | |
| | | | | |
| | | |
Total assets | | $ | 1,374,715 | | | | 1,313,867 | | | | 5 | |
| | | | | |
| | | |
Liabilities | | | | | | | | | | | | |
Noninterest-bearing deposits | | $ | 268,991 | | | | 244,003 | | | | 10 | |
Interest-bearing deposits | | | 683,248 | | | | 676,067 | | | | 1 | |
| | | | | |
| | | |
Total deposits | | | 952,239 | | | | 920,070 | | | | 3 | |
Short-term borrowings | | | 51,957 | | | | 49,091 | | | | 6 | |
Accrued expenses and other liabilities | | | 83,659 | | | | 77,665 | | | | 8 | |
Long-term debt (includes $218 and $0 carried at fair value) | | | 130,801 | | | | 125,354 | | | | 4 | |
| | | | | |
| | | |
Total liabilities | | | 1,218,656 | | | | 1,172,180 | | | | 4 | |
| | | | | |
| | | |
Equity | | | | | | | | | | | | |
| | | |
Wells Fargo stockholders’ equity: | | | | | | | | | | | | |
Preferred stock | | | 12,283 | | | | 11,431 | | | | 7 | |
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,463,056,853 and 5,358,522,061 shares | | | 9,105 | | | | 8,931 | | | | 2 | |
Additional paid-in capital | | | 59,089 | | | | 55,957 | | | | 6 | |
Retained earnings | | | 73,994 | | | | 64,385 | | | | 15 | |
Cumulative other comprehensive income | | | 6,435 | | | | 3,207 | | | | 101 | |
Treasury stock – 173,431,978 shares and 95,910,425 shares | | | (5,186) | | | | (2,744) | | | | 89 | |
Unearned ESOP shares | | | (1,041) | | | | (926) | | | | 12 | |
| | | | | |
| | | |
Total Wells Fargo stockholders’ equity | | | 154,679 | | | | 140,241 | | | | 10 | |
Noncontrolling interests | | | 1,380 | | | | 1,446 | | | | (5) | |
| | | | | |
| | | |
Total equity | | | 156,059 | | | | 141,687 | | | | 10 | |
| | | | | |
| | | |
Total liabilities and equity | | $ | 1,374,715 | | | | 1,313,867 | | | | 5 | |
| |
26
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
| | | | | | | | | | | | | | | | | | | | |
| |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Assets | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 16,986 | | | | 16,811 | | | | 17,000 | | | | 19,440 | | | | 18,314 | |
Federal funds sold, securities purchased under resale agreements and other short-term investments | | | 100,442 | | | | 74,635 | | | | 74,143 | | | | 44,367 | | | | 89,804 | |
Trading assets | | | 60,592 | | | | 64,419 | | | | 75,696 | | | | 77,814 | | | | 57,786 | |
Securities available for sale | | | 229,350 | | | | 226,846 | | | | 230,266 | | | | 222,613 | | | | 207,176 | |
Mortgages held for sale | | | 50,337 | | | | 50,462 | | | | 43,449 | | | | 48,357 | | | | 42,704 | |
Loans held for sale | | | 298 | | | | 853 | | | | 958 | | | | 1,338 | | | | 743 | |
| | | | | |
Loans | | | 782,630 | | | | 775,199 | | | | 766,521 | | | | 769,631 | | | | 760,106 | |
Allowance for loan losses | | | (17,385) | | | | (18,320) | | | | (18,852) | | | | (19,372) | | | | (20,039) | |
| |
| | | | | |
Net loans | | | 765,245 | | | | 756,879 | | | | 747,669 | | | | 750,259 | | | | 740,067 | |
| |
Mortgage servicing rights: | | | | | | | | | | | | | | | | | | | | |
Measured at fair value | | | 10,956 | | | | 12,081 | | | | 13,578 | | | | 12,603 | | | | 12,372 | |
Amortized | | | 1,144 | | | | 1,130 | | | | 1,074 | | | | 1,408 | | | | 1,397 | |
Premises and equipment, net | | | 9,165 | | | | 9,317 | | | | 9,291 | | | | 9,531 | | | | 9,607 | |
Goodwill | | | 25,637 | | | | 25,406 | | | | 25,140 | | | | 25,115 | | | | 25,038 | |
Other assets | | | 104,563 | | | | 97,365 | | | | 95,535 | | | | 101,022 | | | | 99,937 | |
| |
| | | | | |
Total assets | | $ | 1,374,715 | | | | 1,336,204 | | | | 1,333,799 | | | | 1,313,867 | | | | 1,304,945 | |
| |
| | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing deposits | | $ | 268,991 | | | | 253,999 | | | | 255,013 | | | | 244,003 | | | | 229,863 | |
Interest-bearing deposits | | | 683,248 | | | | 674,934 | | | | 675,254 | | | | 676,067 | | | | 665,565 | |
| |
| | | | | |
Total deposits | | | 952,239 | | | | 928,933 | | | | 930,267 | | | | 920,070 | | | | 895,428 | |
Short-term borrowings | | | 51,957 | | | | 56,023 | | | | 50,964 | | | | 49,091 | | | | 50,775 | |
Accrued expenses and other liabilities | | | 83,659 | | | | 76,827 | | | | 75,967 | | | | 77,665 | | | | 86,284 | |
Long-term debt | | | 130,801 | | | | 124,984 | | | | 129,752 | | | | 125,354 | | | | 133,214 | |
| |
| | | | | |
Total liabilities | | | 1,218,656 | | | | 1,186,767 | | | | 1,186,950 | | | | 1,172,180 | | | | 1,165,701 | |
| |
| | | | | |
Equity | | | | | | | | | | | | | | | | | | | | |
Wells Fargo stockholders’ equity: | | | | | | | | | | | | | | | | | | | | |
Preferred stock | | | 12,283 | | | | 11,694 | | | | 12,101 | | | | 11,431 | | | | 11,566 | |
Common stock | | | 9,105 | | | | 9,054 | | | | 9,008 | | | | 8,931 | | | | 8,902 | |
Additional paid-in capital | | | 59,089 | | | | 58,091 | | | | 57,569 | | | | 55,957 | | | | 55,495 | |
Retained earnings | | | 73,994 | | | | 70,456 | | | | 67,239 | | | | 64,385 | | | | 61,135 | |
Cumulative other comprehensive income | | | 6,435 | | | | 4,629 | | | | 4,216 | | | | 3,207 | | | | 3,828 | |
Treasury stock | | | (5,186) | | | | (4,638) | | | | (2,958) | | | | (2,744) | | | | (2,087) | |
Unearned ESOP shares | | | (1,041) | | | | (1,216) | | | | (1,659) | | | | (926) | | | | (1,071) | |
| |
| | | | | |
Total Wells Fargo stockholders’ equity | | | 154,679 | | | | 148,070 | | | | 145,516 | | | | 140,241 | | | | 137,768 | |
Noncontrolling interests | | | 1,380 | | | | 1,367 | | | | 1,333 | | | | 1,446 | | | | 1,476 | |
| |
| | | | | |
Total equity | | | 156,059 | | | | 149,437 | | | | 146,849 | | | | 141,687 | | | | 139,244 | |
| |
| | | | | |
Total liabilities and equity | | $ | 1,374,715 | | | | 1,336,204 | | | | 1,333,799 | | | | 1,313,867 | | | | 1,304,945 | |
| |
27
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter ended | | | | |
| | | Sept. 30, 2012 | | | | | | | | June 30, 2012 | | | | | | Mar. 31, 2012 | | | | | | Dec. 31, 2011 | | | | | | Sept. 30, 2011 | | | | |
| ($ in billions) | | Average
balance | | | Yields/
rates | | | | | | | | Average
balance | | | | | Yields/
rates | | | | | | Average
balance | | | | | Yields/
rates | | | | | | Average
balance | | | | | Yields/
rates | | | | | | Average
balance | | | | | Yields/
rates | | | | |
Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal funds sold, securities purchased under resale agreements and other short-term investments | | $ | 91.6 | | | | 0.44 | | | | % | | | | | $ | 71.3 | | | | | | 0.47 | | | | % | | | $ | 56.0 | | | | | | 0.52 | | | | % | | | $ | 68.0 | | | | | | 0.52 | | | | % | | | $ | 98.9 | | | | | | 0.42 | | | | % | |
Trading assets | | | 39.5 | | | | 3.08 | | | | | | | | | | 42.6 | | | | | | 3.27 | | | | | | | | 43.8 | | | | | | 3.50 | | | | | | | | 45.5 | | | | | | 3.57 | | | | | | | | 37.9 | | | | | | 3.67 | | | | | |
Securities available for sale (2): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities of U.S. Treasury and federal agencies | | | 1.4 | | | | 1.05 | | | | | | | | | | 2.0 | | | | | | 1.60 | | | | | | | | 5.8 | | | | | | 0.97 | | | | | | | | 8.7 | | | | | | 0.99 | | | | | | | | 9.6 | | | | | | 1.02 | | | | | |
Securities of U.S. states and political subdivisions | | | 35.9 | | | | 4.36 | | | | | | | | | | 34.5 | | | | | | 4.39 | | | | | | | | 32.6 | | | | | | 4.52 | | | | | | | | 28.0 | | | | | | 4.80 | | | | | | | | 25.6 | | | | | | 4.93 | | | | | |
Mortgage-backed securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal agencies | | | 94.3 | | | | 2.88 | | | | | | | | | | 95.0 | | | | | | 3.37 | | | | | | | | 91.3 | | | | | | 3.49 | | | | | | | | 84.3 | | | | | | 3.68 | | | | | | | | 72.8 | | | | | | 4.41 | | | | | |
Residential and commercial | | | 33.1 | | | | 6.67 | | | | | | | | | | 33.9 | | | | | | 6.97 | | | | | | | | 34.5 | | | | | | 6.80 | | | | | | | | 34.7 | | | | | | 7.05 | | | | | | | | 32.6 | | | | | | 7.46 | | | | | |
Total mortgage-backed securities | | | 127.4 | | | | 3.87 | | | | | | | | | | 128.9 | | | | | | 4.32 | | | | | | | | 125.8 | | | | | | 4.40 | | | | | | | | 119.0 | | | | | | 4.66 | | | | | | | | 105.4 | | | | | | 5.36 | | | | | |
Other debt and equity securities | | | 47.7 | | | | 4.07 | | | | | | | | | | 48.9 | | | | | | 4.39 | | | | | | | | 50.4 | | | | | | 3.82 | | | | | | | | 47.3 | | | | | | 4.38 | | | | | | | | 38.9 | | | | | | 4.69 | | | | | |
Total securities available for sale | | | 212.4 | | | | 3.98 | | | | | | | | | | 214.3 | | | | | | 4.32 | | | | | | | | 214.6 | | | | | | 4.19 | | | | | | | | 203.0 | | | | | | 4.46 | | | | | | | | 179.5 | | | | | | 4.92 | | | | | |
Mortgages held for sale | | | 52.1 | | | | 3.65 | | | | | | | | | | 49.5 | | | | | | 3.86 | | | | | | | | 46.9 | | | | | | 3.91 | | | | | | | | 44.8 | | | | | | 4.07 | | | | | | | | 34.6 | | | | | | 4.49 | | | | | |
Loans held for sale | | | 0.9 | | | | 7.38 | | | | | | | | | | 0.9 | | | | | | 5.48 | | | | | | | | 0.8 | | | | | | 5.09 | | | | | | | | 1.1 | | | | | | 5.84 | | | | | | | | 1.0 | | | | | | 5.21 | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 177.5 | | | | 3.84 | | | | | | | | | | 171.8 | | | | | | 4.21 | | | | | | | | 166.8 | | | | | | 4.18 | | | | | | | | 166.9 | | | | | | 4.08 | | | | | | | | 159.6 | | | | | | 4.22 | | | | | |
Real estate mortgage | | | 105.1 | | | | 4.05 | | | | | | | | | | 105.5 | | | | | | 4.60 | | | | | | | | 106.0 | | | | | | 4.07 | | | | | | | | 105.2 | | | | | | 4.26 | | | | | | | | 102.4 | | | | | | 3.93 | | | | | |
Real estate construction | | | 17.7 | | | | 5.21 | | | | | | | | | | 17.9 | | | | | | 4.96 | | | | | | | | 18.7 | | | | | | 4.79 | | | | | | | | 19.6 | | | | | | 4.61 | | | | | | | | 20.5 | | | | | | 6.12 | | | | | |
Lease financing | | | 12.6 | | | | 6.60 | | | | | | | | | | 12.9 | | | | | | 6.86 | | | | | | | | 13.1 | | | | | | 8.89 | | | | | | | | 12.9 | | | | | | 7.41 | | | | | | | | 13.0 | | | | | | 7.21 | | | | | |
Foreign | | | 39.7 | | | | 2.46 | | | | | | | | | | 38.9 | | | | | | 2.57 | | | | | | | | 41.2 | | | | | | 2.52 | | | | | | | | 38.8 | | | | | | 2.39 | | | | | | | | 38.2 | | | | | | 2.42 | | | | | |
Total commercial | | | 352.6 | | | | 3.91 | | | | | | | | | | 347.0 | | | | | | 4.28 | | | | | | | | 345.8 | | | | | | 4.16 | | | | | | | | 343.4 | | | | | | 4.10 | | | | | | | | 333.7 | | | | | | 4.16 | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 234.0 | | | | 4.51 | | | | | | | | | | 230.0 | | | | | | 4.62 | | | | | | | | 229.7 | | | | | | 4.69 | | | | | | | | 229.8 | | | | | | 4.74 | | | | | | | | 223.8 | | | | | | 4.83 | | | | | |
Real estate 1-4 family junior lien mortgage | | | 79.7 | | | | 4.26 | | | | | | | | | | 82.1 | | | | | | 4.30 | | | | | | | | 84.7 | | | | | | 4.27 | | | | | | | | 87.2 | | | | | | 4.34 | | | | | | | | 89.1 | | | | | | 4.37 | | | | | |
Credit card | | | 23.0 | | | | 12.64 | | | | | | | | | | 22.1 | | | | | | 12.70 | | | | | | | | 22.1 | | | | | | 12.93 | | | | | | | | 21.9 | | | | | | 12.96 | | | | | | | | 21.5 | | | | | | 12.96 | | | | | |
Other revolving credit and installment | | | 87.4 | | | | 6.08 | | | | | | | | | | 87.0 | | | | | | 6.09 | | | | | | | | 86.3 | | | | | | 6.19 | | | | | | | | 86.3 | | | | | | 6.23 | | | | | | | | 86.5 | | | | | | 6.25 | | | | | |
Total consumer | | | 424.1 | | | | 5.23 | | | | | | | | | | 421.2 | | | | | | 5.29 | | | | | | | | 422.8 | | | | | | 5.34 | | | | | | | | 425.2 | | | | | | 5.39 | | | | | | | | 420.9 | | | | | | 5.44 | | | | | |
Total loans | | | 776.7 | | | | 4.63 | | | | | | | | | | 768.2 | | | | | | 4.83 | | | | | | | | 768.6 | | | | | | 4.81 | | | | | | | | 768.6 | | | | | | 4.81 | | | | | | | | 754.6 | | | | | | 4.87 | | | | | |
Other | | | 4.4 | | | | 4.62 | | | | | | | | | | 4.5 | | | | | | 4.56 | | | | | | | | 4.6 | | | | | | 4.42 | | | | | | | | 4.7 | | | | | | 4.32 | | | | | | | | 4.9 | | | | | | 4.18 | | | | | |
Total earning assets | | $ | 1,177.6 | | | | 4.09 | | | | % | | | | | $ | 1,151.3 | | | | | | 4.37 | | | | % | | | $ | 1,135.3 | | | | | | 4.39 | | | | % | | | $ | 1,135.7 | | | | | | 4.41 | | | | % | | | $ | 1,111.4 | | | | | | 4.43 | | | | % | |
| | | | | | | | | | | | | | | | | | | | |
Funding sources | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing checking | | $ | 28.8 | | | | 0.06 | | | | % | | | | | $ | 30.4 | | | | | | 0.07 | | | | % | | | $ | 32.2 | | | | | | 0.05 | | | | % | | | $ | 35.3 | | | | | | 0.06 | | | | % | | | $ | 44.0 | | | | | | 0.07 | | | | % | |
Market rate and other savings | | | 506.1 | | | | 0.12 | | | | | | | | | | 500.3 | | | | | | 0.12 | | | | | | | | 496.0 | | | | | | 0.12 | | | | | | | | 485.1 | | | | | | 0.14 | | | | | | | | 473.4 | | | | | | 0.17 | | | | | |
Savings certificates | | | 58.2 | | | | 1.29 | | | | | | | | | | 60.4 | | | | | | 1.34 | | | | | | | | 62.7 | | | | | | 1.36 | | | | | | | | 64.9 | | | | | | 1.43 | | | | | | | | 67.6 | | | | | | 1.47 | | | | | |
Other time deposits | | | 14.4 | | | | 1.49 | | | | | | | | | | 12.8 | | | | | | 1.83 | | | | | | | | 12.7 | | | | | | 1.93 | | | | | | | | 12.9 | | | | | | 1.85 | | | | | | | | 12.8 | | | | | | 2.02 | | | | | |
Deposits in foreign offices | | | 71.8 | | | | 0.16 | | | | | | | | | | 65.6 | | | | | | 0.17 | | | | | | | | 64.8 | | | | | | 0.16 | | | | | | | | 67.2 | | | | | | 0.20 | | | | | | | | 63.5 | | | | | | 0.23 | | | | | |
Total interest-bearing deposits | | | 679.3 | | | | 0.25 | | | | | | | | | | 669.5 | | | | | | 0.27 | | | | | | | | 668.4 | | | | | | 0.27 | | | | | | | | 665.4 | | | | | | 0.30 | | | | | | | | 661.3 | | | | | | 0.34 | | | | | |
Short-term borrowings | | | 51.9 | | | | 0.17 | | | | | | | | | | 51.7 | | | | | | 0.19 | | | | | | | | 48.4 | | | | | | 0.15 | | | | | | | | 48.7 | | | | | | 0.14 | | | | | | | | 50.4 | | | | | | 0.18 | | | | | |
Long-term debt | | | 127.5 | | | | 2.37 | | | | | | | | | | 127.7 | | | | | | 2.48 | | | | | | | | 127.5 | | | | | | 2.60 | | | | | | | | 129.4 | | | | | | 2.73 | | | | | | | | 139.5 | | | | | | 2.81 | | | | | |
Other liabilities | | | 9.9 | | | | 2.40 | | | | | | | | | | 10.4 | | | | | | 2.48 | | | | | | | | 9.8 | | | | | | 2.63 | | | | | | | | 12.2 | | | | | | 2.60 | | | | | | | | 11.2 | | | | | | 2.75 | | | | | |
Total interest-bearing liabilities | | | 868.6 | | | | 0.58 | | | | | | | | | | 859.3 | | | | | | 0.62 | | | | | | | | 854.1 | | | | | | 0.64 | | | | | | | | 855.7 | | | | | | 0.69 | | | | | | | | 862.4 | | | | | | 0.76 | | | | | |
Portion of noninterest-bearing funding sources | | | 309.0 | | | | - | | | | | | | | | | 292.0 | | | | | | - | | | | | | | | 281.2 | | | | | | - | | | | | | | | 280.0 | | | | | | - | | | | | | | | 249.0 | | | | | | - | | | | | |
Total funding sources | | $ | 1,177.6 | | | | 0.43 | | | | | | | | | $ | 1,151.3 | | | | | | 0.46 | | | | | | | $ | 1,135.3 | | | | | | 0.48 | | | | | | | $ | 1,135.7 | | | | | | 0.52 | | | | | | | $ | 1,111.4 | | | | | | 0.59 | | | | | |
Net interest margin on a taxable-equivalent basis | | | | | | | 3.66 | | | | % | | | | | | | | | | | | 3.91 | | | | % | | | | | | | | | | 3.91 | | | | % | | | | | | | | | | 3.89 | | | | % | | | | | | | | | | 3.84 | | | | % | |
Noninterest-earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 15.7 | | | | | | | | | | | | | | 16.2 | | | | | | | | | | | | | | 17.0 | | | | | | | | | | | | | | 17.7 | | | | | | | | | | | | | | 17.1 | | | | | | | | | | | |
Goodwill | | | 25.5 | | | | | | | | | | | | | | 25.3 | | | | | | | | | | | | | | 25.1 | | | | | | | | | | | | | | 25.1 | | | | | | | | | | | | | | 25.0 | | | | | | | | | | | |
Other | | | 135.5 | | | | | | | | | | | | | | 128.8 | | | | | | | | | | | | | | 125.5 | | | | | | | | | | | | | | 128.2 | | | | | | | | | | | | | | 127.9 | | | | | | | | | | | |
Total noninterest-earnings assets | | $ | 176.7 | | | | | | | | | | | | | | 170.3 | | | | | | | | | | | | | | 167.6 | | | | | | | | | | | | | | 171.0 | | | | | | | | | | | | | | 170.0 | | | | | | | | | | | |
Noninterest-bearing funding sources | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | $ | 267.2 | | | | | | | | | | | | | | 254.5 | | | | | | | | | | | | | | 246.6 | | | | | | | | | | | | | | 246.7 | | | | | | | | | | | | | | 221.2 | | | | | | | | | | | |
Other liabilities | | | 66.1 | | | | | | | | | | | | | | 58.4 | | | | | | | | | | | | | | 57.2 | | | | | | | | | | | | | | 63.5 | | | | | | | | | | | | | | 57.5 | | | | | | | | | | | |
Total equity | | | 152.4 | | | | | | | | | | | | | | 149.4 | | | | | | | | | | | | | | 145.0 | | | | | | | | | | | | | | 140.8 | | | | | | | | | | | | | | 140.3 | | | | | | | | | | | |
Noninterest-bearing funding sources used to fund earning assets | | | (309.0 | ) | | | | | | | | | | | | | (292.0 | ) | | | | | | | | | | | | | (281.2 | ) | | | | | | | | | | | | | (280.0 | ) | | | | | | | | | | | | | (249.0 | ) | | | | | | | | | | |
Net noninterest-bearing funding sources | | $ | 176.7 | | | | | | | | | | | | | | 170.3 | | | | | | | | | | | | | | 167.6 | | | | | | | | | | | | | | 171.0 | | | | | | | | | | | | | | 170.0 | | | | | | | | | | | |
Total assets | | $ | 1,354.3 | | | | | | | | | | | | | | 1,321.6 | | | | | | | | | | | | | | 1,302.9 | | | | | | | | | | | | | | 1,306.7 | | | | | | | | | | | | | | 1,281.4 | | | | | | | | | | | |
| (1) | Our average prime rate was 3.25% for quarters ended September 30, June 30 and March 31, 2012, and December 31 and September 30, 2011. The average three-month London Interbank Offered Rate (LIBOR) was 0.43%, 0.47%, 0.51%, 0.48% and 0.30% for the same quarters, respectively. |
| (2) | Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts represent amortized cost for the periods presented. |
28
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SECURITIES AVAILABLE FOR SALE
| | | | | | | | | | | | | | | | | | | | |
| |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| | | | | |
Securities of U.S. Treasury and federal agencies | | $ | 1,869 | | | | 1,493 | | | | 4,678 | | | | 6,968 | | | | 13,813 | |
Securities of U.S. states and political subdivisions | | | 37,925 | | | | 37,251 | | | | 34,237 | | | | 32,593 | | | | 26,970 | |
Mortgage-backed securities: | | | | | | | | | | | | | | | | | | | | |
Federal agencies | | | 102,713 | | | | 101,863 | | | | 102,665 | | | | 96,754 | | | | 84,716 | |
Residential and commercial | | | 36,098 | | | | 35,646 | | | | 36,486 | | | | 35,986 | | | | 35,159 | |
| | | | | |
Total mortgage-backed securities | | | 138,811 | | | | 137,509 | | | | 139,151 | | | | 132,740 | | | | 119,875 | |
Other debt securities | | | 47,993 | | | | 47,746 | | | | 49,047 | | | | 46,895 | | | | 42,925 | |
| | | | | |
Total debt securities available for sale | | | 226,598 | | | | 223,999 | | | | 227,113 | | | | 219,196 | | | | 203,583 | |
Marketable equity securities | | | 2,752 | | | | 2,847 | | | | 3,153 | | | | 3,417 | | | | 3,593 | |
| | | | | |
Total securities available for sale | | $ | 229,350 | | | | 226,846 | | | | 230,266 | | | | 222,613 | | | | 207,176 | |
| |
|
| FIVE QUARTER LOANS | |
| |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 178,191 | | | | 177,646 | | | | 168,546 | | | | 167,216 | | | | 164,510 | |
Real estate mortgage | | | 104,611 | | | | 105,666 | | | | 105,874 | | | | 105,975 | | | | 104,363 | |
Real estate construction | | | 17,710 | | | | 17,594 | | | | 18,549 | | | | 19,382 | | | | 19,719 | |
Lease financing | | | 12,279 | | | | 12,729 | | | | 13,143 | | | | 13,117 | | | | 12,852 | |
Foreign (1) | | | 39,741 | | | | 40,417 | | | | 39,637 | | | | 39,760 | | | | 38,390 | |
| | | | | |
Total commercial | | | 352,532 | | | | 354,052 | | | | 345,749 | | | | 345,450 | | | | 339,834 | |
| | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 240,554 | | | | 230,263 | | | | 228,885 | | | | 228,894 | | | | 223,758 | |
Real estate 1-4 family junior lien mortgage | | | 78,091 | | | | 80,881 | | | | 83,173 | | | | 85,991 | | | | 88,264 | |
Credit card | | | 23,692 | | | | 22,706 | | | | 21,998 | | | | 22,836 | | | | 21,650 | |
Other revolving credit and installment | | | 87,761 | | | | 87,297 | | | | 86,716 | | | | 86,460 | | | | 86,600 | |
| | | | | |
Total consumer | | | 430,098 | | | | 421,147 | | | | 420,772 | | | | 424,181 | | | | 420,272 | |
| | | | | |
Total loans (2) | | $ | 782,630 | | | | 775,199 | | | | 766,521 | | | | 769,631 | | | | 760,106 | |
| |
| (1) | Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign if the borrower’s primary address is outside of the United States. |
| (2) | Includes $32.5 billion, $33.8 billion, $35.5 billion, $36.7 billion and $37.2 billion of purchased credit-impaired (PCI) loans at September 30, June 30 and March 31, 2012, and December 31 and September 30, 2011, respectively. See the PCI loans table for detail of PCI loans. |
29
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS)
| | | | | | | | | | | | | | | | | | | | |
| |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Nonaccrual loans: | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,404 | | | | 1,549 | | | | 1,726 | | | | 2,142 | | | | 2,128 | |
Real estate mortgage | | | 3,599 | | | | 3,832 | | | | 4,081 | | | | 4,085 | | | | 4,429 | |
Real estate construction | | | 1,253 | | | | 1,421 | | | | 1,709 | | | | 1,890 | | | | 1,915 | |
Lease financing | | | 49 | | | | 43 | | | | 45 | | | | 53 | | | | 71 | |
Foreign | | | 66 | | | | 79 | | | | 38 | | | | 47 | | | | 68 | |
| |
| | | | | |
Total commercial | | | 6,371 | | | | 6,924 | | | | 7,599 | | | | 8,217 | | | | 8,611 | |
| |
| | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 11,195 | | | | 10,368 | | | | 10,683 | | | | 10,913 | | | | 11,024 | |
Real estate 1-4 family junior lien mortgage (1) | | | 3,140 | | | | 3,091 | | | | 3,558 | | | | 1,975 | | | | 2,035 | |
Other revolving credit and installment | | | 338 | | | | 195 | | | | 186 | | | | 199 | | | | 230 | |
| |
| | | | | |
Total consumer (2) | | | 14,673 | | | | 13,654 | | | | 14,427 | | | | 13,087 | | | | 13,289 | |
| |
| | | | | |
Total nonaccrual loans (3)(4)(5) | | | 21,044 | | | | 20,578 | | | | 22,026 | | | | 21,304 | | | | 21,900 | |
| |
| | | | | |
As a percentage of total loans | | | 2.69 | % | | | 2.65 | | | | 2.87 | | | | 2.77 | | | | 2.88 | |
Foreclosed assets: | | | | | | | | | | | | | | | | | | | | |
Government insured/guaranteed (6) | | $ | 1,479 | | | | 1,465 | | | | 1,352 | | | | 1,319 | | | | 1,336 | |
Non-government insured/guaranteed | | | 2,730 | | | | 2,842 | | | | 3,265 | | | | 3,342 | | | | 3,608 | |
| |
| | | | | |
Total foreclosed assets | | | 4,209 | | | | 4,307 | | | | 4,617 | | | | 4,661 | | | | 4,944 | |
| |
| | | | | |
Total nonperforming assets | | $ | 25,253 | | | | 24,885 | | | | 26,643 | | | | 25,965 | | | | 26,844 | |
| |
| | | | | |
As a percentage of total loans | | | 3.23 | % | | | 3.21 | | | | 3.48 | | | | 3.37 | | | | 3.53 | |
|
| |
| (1) | Includes $1.7 billion at March 31, 2012, resulting from implementation of theInteragency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties issued on January 31, 2012. This guidance accelerated the timing of placing these loans on nonaccrual to coincide with the timing of placing the related real estate 1-4 family first mortgage loans on nonaccrual. |
| (2) | Includes $1.4 billion at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series. The updated guidance requires us to place on nonaccrual status those performing loans where the borrower’s obligation to us has been restructured in bankruptcy. |
| (3) | Also includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories. |
| (4) | Excludes PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms. |
| (5) | Real estate 1-4 family mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed. |
| (6) | Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are insured by the FHA or guaranteed by the VA. |
30
Wells Fargo & Company and Subsidiaries
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
| | | | | | | | | | | | | | | | | | | | |
| |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Loans 90 days or more past due and still accruing: | | | | | | | | | | | | | | | | | | | | |
Total (excluding PCI)(1): | | $ | 22,894 | | | | 22,872 | | | | 22,555 | | | | 22,569 | | | | 19,639 | |
Less: FHA insured/VA guaranteed (2) | | | 20,320 | | | | 20,368 | | | | 19,681 | | | | 19,240 | | | | 16,498 | |
Less: Student loans guaranteed under the FFELP (3) | | | 1,082 | | | | 1,144 | | | | 1,238 | | | | 1,281 | | | | 1,212 | |
| |
| | | | | |
Total, not government insured/guaranteed | | $ | 1,492 | | | | 1,360 | | | | 1,636 | | | | 2,048 | | | | 1,929 | |
| |
| | | | | |
By segment and class, not government insured/guaranteed: | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 49 | | | | 44 | | | | 104 | | | | 153 | | | | 108 | |
Real estate mortgage | | | 206 | | | | 184 | | | | 289 | | | | 256 | | | | 207 | |
Real estate construction | | | 41 | | | | 25 | | | | 25 | | | | 89 | | | | 57 | |
Foreign | | | 2 | | | | 3 | | | | 7 | | | | 6 | | | | 11 | |
| |
| | | | | |
Total commercial | | | 298 | | | | 256 | | | | 425 | | | | 504 | | | | 383 | |
| |
| | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage (4) | | | 627 | | | | 561 | | | | 616 | | | | 781 | | | | 819 | |
Real estate 1-4 family junior lien mortgage (4)(5) | | | 151 | | | | 159 | | | | 156 | | | | 279 | | | | 255 | |
Credit card | | | 288 | | | | 274 | | | | 319 | | | | 346 | | | | 328 | |
Other revolving credit and installment | | | 128 | | | | 110 | | | | 120 | | | | 138 | | | | 144 | |
| |
| | | | | |
Total consumer | | | 1,194 | | | | 1,104 | | | | 1,211 | | | | 1,544 | | | | 1,546 | |
| |
| | | | | |
Total, not government insured/guaranteed | | $ | 1,492 | | | | 1,360 | | | | 1,636 | | | | 2,048 | | | | 1,929 | |
| |
| (1) | The carrying value of purchased credit-impaired (PCI) loans contractually 90 days or more past due was $6.2 billion, $6.6 billion, $7.1 billion, $8.7 billion and $8.9 billion, at September 30, June 30 and March 31, 2012 and December 31 and September 30, 2011, respectively. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status. |
| (2) | Represents loans whose repayments are insured by the FHA or guaranteed by the VA. |
| (3) | Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP). |
| (4) | Includes mortgages held for sale 90 days or more past due and still accruing. |
| (5) | During first quarter 2012, $43 million of 1-4 family junior lien mortgages were transferred to nonaccrual upon implementation of the Interagency Guidance issued on January 31, 2012. |
31
Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS
Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans predominately represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date.
Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.
Subsequent to acquisition, we regularly evaluate our estimates of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. If we have probable decreases in the expected cash flows (other than due to a decrease in rate indices), we charge the provision for credit losses, resulting in an increase to the allowance for loan losses. If we have probable and significant increases in the expected cash flows subsequent to establishing an additional allowance, we first reverse any previously established allowance and then increase interest income over the remaining life of the loan, or pool of loans.
As a result of PCI loan accounting, certain credit-related ratios cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.
| | | | | | | | | | | | | | | | | | | | |
| |
| | |
| | | Sept. 30, 2012 | | | December 31, | |
| | | | | |
| (in millions) | | | 2011 | | | 2010 | | | 2009 | | | 2008 | |
| |
| | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 246 | | | | 399 | | | | 718 | | | | 1,911 | | | | 4,580 | |
Real estate mortgage | | | 2,350 | | | | 3,270 | | | | 2,855 | | | | 4,137 | | | | 5,803 | |
Real estate construction | | | 1,164 | | | | 1,745 | | | | 2,949 | | | | 5,207 | | | | 6,462 | |
Foreign | | | 1,037 | | | | 1,353 | | | | 1,413 | | | | 1,733 | | | | 1,859 | |
| |
| | | | | |
Total commercial | | | 4,797 | | | | 6,767 | | | | 7,935 | | | | 12,988 | | | | 18,704 | |
| |
| | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 27,535 | | | | 29,746 | | | | 33,245 | | | | 38,386 | | | | 39,214 | |
Real estate 1-4 family junior lien mortgage | | | 181 | | | | 206 | | | | 250 | | | | 331 | | | | 728 | |
Other revolving credit and installment | | | - | | | | - | | | | - | | | | - | | | | 151 | |
| |
| | | | | |
Total consumer | | | 27,716 | | | | 29,952 | | | | 33,495 | | | | 38,717 | | | | 40,093 | |
| |
| | | | | |
Total PCI loans (carrying value) | | $ | 32,513 | | | | 36,719 | | | | 41,430 | | | | 51,705 | | | | 58,797 | |
| |
32
Wells Fargo & Company and Subsidiaries
CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS
The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. A nonaccretable difference is established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all our commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed troubled debt restructurings (TDRs). Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference. The following table provides an analysis of changes in the nonaccretable difference.
| | | | | | | | | | | | | | | | |
| |
| (in millions) | | Commercial | | | Pick-a-Pay | | | Other
consumer | | | Total | |
| |
| | | | |
Balance, December 31, 2008 | | $ | 10,410 | | | | 26,485 | | | | 4,069 | | | | 40,964 | |
| | | | |
Addition of nonaccretable difference due to acquisitions | | | 188 | | | | - | | | | - | | | | 188 | |
| | | | |
Release of nonaccretable difference due to: | | | | | | | | | | | | | | | | |
Loans resolved by settlement with borrower (1) | | | (1,345) | | | | - | | | | - | | | | (1,345) | |
Loans resolved by sales to third parties (2) | | | (299) | | | | - | | | | (85) | | | | (384) | |
Reclassification to accretable yield for loans with improving credit-related cash flows (3) | | | (1,216) | | | | (2,383) | | | | (614) | | | | (4,213) | |
Use of nonaccretable difference due to: | | | | | | | | | | | | | | | | |
Losses from loan resolutions and write-downs (4) | | | (6,809) | | | | (14,976) | | | | (2,718) | | | | (24,503) | |
| |
| | | | |
Balance, December 31, 2011 | | | 929 | | | | 9,126 | | | | 652 | | | | 10,707 | |
| | | | |
Addition of nonaccretable difference due to acquisitions | | | - | | | | - | | | | - | | | | - | |
| | | | |
Release of nonaccretable difference due to: | | | | | | | | | | | | | | | | |
Loans resolved by settlement with borrower (1) | | | (76) | | | | - | | | | - | | | | (76) | |
Loans resolved by sales to third parties (2) | | | (4) | | | | - | | | | - | | | | (4) | |
Reclassification to accretable yield for loans with improving credit-related cash flows (3) | | | (188) | | | | (648) | | | | (170) | | | | (1,006) | |
Use of nonaccretable difference due to: | | | | | | | | | | | | | | | | |
Losses from loan resolutions and write-downs (4) | | | (104) | | | | (1,799) | | | | (112) | | | | (2,015) | |
| |
| | | | |
Balance, September 30, 2012 | | $ | 557 | | | | 6,679 | | | | 370 | | | | 7,606 | |
| |
| | | | | | | | | | | | | | | | |
| |
| | | | |
Balance, June 30, 2012 | | $ | 658 | | | | 8,128 | | | | 440 | | | | 9,226 | |
| | | | |
Addition of nonaccretable difference due to acquisitions | | | - | | | | - | | | | - | | | | - | |
| | | | |
Release of nonaccretable difference due to: | | | | | | | | | | | | | | | | |
Loans resolved by settlement with borrower (1) | | | (24) | | | | - | | | | - | | | | (24) | |
Loans resolved by sales to third parties (2) | | | (4) | | | | - | | | | - | | | | (4) | |
Reclassification to accretable yield for loans with improving credit-related cash flows (3) | | | (41) | | | | (603) | | | | (43) | | | | (687) | |
Use of nonaccretable difference due to: | | | | | | | | | | | | | | | | |
Losses from loan resolutions and write-downs (4) | | | (32) | | | | (846) | | | | (27) | | | | (905) | |
| |
| | | | |
Balance, September 30, 2012 | | $ | 557 | | | | 6,679 | | | | 370 | | | | 7,606 | |
| |
| (1) | Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases for settlements with borrowers due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations. |
| (2) | Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale. |
| (3) | Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans. |
| (4) | Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. |
33
Wells Fargo & Company and Subsidiaries
CHANGES IN ACCRETABLE YIELD RELATED TO PCI LOANS
The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated lives of the PCI loans using the effective yield method. The accretable yield is affected by:
| | • | | Changes in interest rate indices for variable rate PCI loans – Expected future cash flows are based on the variable rates in effect at the time of the quarterly assessment of expected cash flows; |
| | • | | Changes in prepayment assumptions – Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and |
| | • | | Changes in the expected principal and interest payments over the estimated life – Updates to changes in expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected. |
The change in the accretable yield related to PCI loans is presented in the following table.
| | | | |
| |
| |
| (in millions) | | | |
| |
| |
Balance, December 31, 2008 | | $ | 10,447 | |
Addition of accretable yield due to acquisitions | | | 128 | |
Accretion into interest income (1) | | | (7,199) | |
Accretion into noninterest income due to sales (2) | | | (237) | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows | | | 4,213 | |
Changes in expected cash flows that do not affect nonaccretable difference (3) | | | 8,609 | |
| |
| |
Balance, December 31, 2011 | | $ | 15,961 | |
Addition of accretable yield due to acquisitions | | | - | |
Accretion into interest income (1) | | | (1,639) | |
Accretion into noninterest income due to sales (2) | | | (5) | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows | | | 1,006 | |
Changes in expected cash flows that do not affect nonaccretable difference (3) | | | 3,589 | |
| |
| |
Balance, September 30, 2012 | | $ | 18,912 | |
| |
| | | | |
| |
| |
Balance, June 30, 2012 | | $ | 15,153 | |
Addition of accretable yield due to acquisitions | | | - | |
Accretion into interest income (1) | | | (495) | |
Accretion into noninterest income due to sales (2) | | | - | |
Reclassification from nonaccretable difference for loans with improving credit-related cash flows | | | 687 | |
Changes in expected cash flows that do not affect nonaccretable difference (3) | | | 3,567 | |
| |
| |
Balance, September 30, 2012 | | $ | 18,912 | |
| |
| (1) | Includes accretable yield released as a result of settlements with borrowers, which is included in interest income. |
| (2) | Includes accretable yield released as a result of sales to third parties, which is included in noninterest income. |
| (3) | Represents changes in cash flows expected to be collected due to changes in interest rates on variable rate PCI loans, changes in prepayment assumptions and the impact of modifications. |
CHANGES IN ALLOWANCE FOR PCI LOAN LOSSES
When it is estimated that the expected cash flows have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.
| | | | | | | | | | | | | | | | |
| |
| | | | |
| (in millions) | | Commercial | | | Pick-a-Pay | | | Other
consumer | | | Total | |
| |
| | | | |
Balance, December 31, 2008 | | $ | - | | | | - | | | | - | | | | - | |
Provision for losses due to credit deterioration | | | 1,668 | | | | - | | | | 116 | | | | 1,784 | |
Charge-offs | | | (1,503) | | | | - | | | | (50) | | | | (1,553) | |
| |
| | | | |
Balance, December 31, 2011 | | | 165 | | | | - | | | | 66 | | | | 231 | |
Provision for losses due to credit deterioration | | | 11 | | | | - | | | | 9 | | | | 20 | |
Charge-offs | | | (78) | | | | - | | | | (13) | | | | (91) | |
| |
| | | | |
Balance, September 30, 2012 | | $ | 98 | | | | - | | | | 62 | | | | 160 | |
| |
| | | | | | | | | | | | | | | | |
| |
| | | | |
Balance, June 30, 2012 | | $ | 145 | | | | - | | | | 67 | | | | 212 | |
Reversal of provision for losses | | | (7) | | | | - | | | | - | | | | (7) | |
Charge-offs | | | (40) | | | | - | | | | (5) | | | | (45) | |
| |
| | | | |
Balance, September 30, 2012 | | $ | 98 | | | | - | | | | 62 | | | | 160 | |
| |
34
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | September 30, 2012 | |
| | | | |
| | | PCI loans | | | | | All other loans | |
| | | | | | | | | | |
| (in millions) | | Adjusted
unpaid
principal
balance (2) | | | Current
LTV
ratio (3) | | | Carrying
value (4) | | | Ratio of
carrying
value to
current
value (5) | | | | | Carrying
value (4) | | | Ratio of
carrying
value to
current
value (5) | |
| |
| | | | | | | |
California | | $ | 22,401 | | | | 116 | % | | $ | 17,833 | | | | 92 | % | | | | $ | 16,162 | | | | 84 | % |
Florida | | | 2,941 | | | | 114 | | | | 2,322 | | | | 86 | | | | | | 3,376 | | | | 95 | |
New Jersey | | | 1,243 | | | | 91 | | | | 1,205 | | | | 86 | | | | | | 2,118 | | | | 79 | |
New York | | | 710 | | | | 91 | | | | 679 | | | | 84 | | | | | | 941 | | | | 80 | |
Texas | | | 310 | | | | 79 | | | | 288 | | | | 73 | | | | | | 1,336 | | | | 64 | |
Other states | | | 5,502 | | | | 105 | | | | 4,657 | | | | 87 | | | | | | 9,163 | | | | 85 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Pick-a-Pay loans | | $ | 33,107 | | | | | | | $ | 26,984 | | | | | | | | | $ | 33,096 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
| |
| (1) | The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2012. |
| (2) | Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan. |
| (3) | The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas. |
| (4) | Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs. |
| (5) | The ratio of carrying value to current value is calculated as the carrying value divided by the collateral value. |
35
Wells Fargo & Company and Subsidiaries
NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS
| | | | | | | | | | | | | | | | | | | | |
| |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Legacy Wachovia commercial and industrial, commercial real estate and foreign PCI loans (1) | | $ | 3,836 | | | | 4,278 | | | | 5,213 | | | | 5,695 | | | | 6,321 | |
| |
| | | | | |
Total commercial | | | 3,836 | | | | 4,278 | | | | 5,213 | | | | 5,695 | | | | 6,321 | |
| |
| | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Pick-a-Pay mortgage (1) | | | 60,080 | | | | 62,045 | | | | 63,983 | | | | 65,652 | | | | 67,361 | |
Liquidating home equity | | | 4,951 | | | | 5,199 | | | | 5,456 | | | | 5,710 | | | | 5,982 | |
Legacy Wells Fargo Financial indirect auto | | | 1,104 | | | | 1,454 | | | | 1,907 | | | | 2,455 | | | | 3,101 | |
Legacy Wells Fargo Financial debt consolidation | | | 15,002 | | | | 15,511 | | | | 16,013 | | | | 16,542 | | | | 17,186 | |
Education Finance - government guaranteed | | | 12,951 | | | | 13,823 | | | | 14,800 | | | | 15,376 | | | | 15,611 | |
Legacy Wachovia other PCI loans (1) | | | 732 | | | | 818 | | | | 860 | | | | 896 | | | | 947 | |
| |
| | | | | |
Total consumer | | | 94,820 | | | | 98,850 | | | | 103,019 | | | | 106,631 | | | | 110,188 | |
| |
| | | | | |
Total non-strategic and liquidating loan portfolios | | $ | 98,656 | | | | 103,128 | | | | 108,232 | | | | 112,326 | | | | 116,509 | |
| |
| (1) | Net of purchase accounting adjustments related to PCI loans. |
HOME EQUITY PORTFOLIOS (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | | |
| | | Outstanding balance | | | | | % of loans two payments or more past due | | | Loss rate (annualized) Quarter ended | |
| | | | | | | | | | | | | | |
| | | | | | | |
| (in millions) | | Sept. 30,
2012 | | | Dec. 31,
2011 | | | | | Sept. 30,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2012 (2) | | | Dec. 31,
2011 | |
| |
| | | | | | | |
Core portfolio (3) | | | | | | | | | | | | | | | | | | | | | | | | | | |
California | | $ | 23,665 | | | | 25,555 | | | | | | 2.62 | % | | | 3.03 | | | | 4.77 | | | | 3.42 | |
Florida | | | 9,946 | | | | 10,870 | | | | | | 4.49 | | | | 4.99 | | | | 4.75 | | | | 4.30 | |
New Jersey | | | 7,474 | | | | 7,973 | | | | | | 3.58 | | | | 3.73 | | | | 3.22 | | | | 2.22 | |
Virginia | | | 4,839 | | | | 5,248 | | | | | | 2.06 | | | | 2.15 | | | | 2.54 | | | | 1.31 | |
Pennsylvania | | | 4,738 | | | | 5,071 | | | | | | 2.73 | | | | 2.82 | | | | 2.15 | | | | 1.41 | |
Other | | | 42,317 | | | | 46,165 | | | | | | 2.67 | | | | 2.79 | | | | 3.75 | | | | 2.50 | |
| | | | | | | | | | | | | | | | |
| | | | | | | |
Total | | | 92,979 | | | | 100,882 | | | | | | 2.90 | | | | 3.13 | | | | 3.93 | | | | 2.79 | |
| | | | | | | | | | | | | | | | |
| | | | | | | |
Liquidating portfolio | | | | | | | | | | | | | | | | | | | | | | | | | | |
California | | | 1,747 | | | | 2,024 | | | | | | 4.56 | | | | 5.50 | | | | 14.57 | | | | 11.93 | |
Florida | | | 234 | | | | 265 | | | | | | 5.66 | | | | 7.02 | | | | 8.25 | | | | 9.71 | |
Arizona | | | 101 | | �� | | 116 | | | | | | 4.12 | | | | 6.64 | | | | 13.07 | | | | 17.54 | |
Texas | | | 83 | | | | 97 | | | | | | 1.31 | | | | 0.93 | | | | 4.95 | | | | 1.57 | |
Minnesota | | | 68 | | | | 75 | | | | | | 2.96 | | | | 2.83 | | | | 12.24 | | | | 8.13 | |
Other | | | 2,718 | | | | 3,133 | | | | | | 3.66 | | | | 4.13 | | | | 10.10 | | | | 7.12 | |
| | | | | | | | | | | | | | | | |
| | | | | | | |
Total | | | 4,951 | | | | 5,710 | | | | | | 4.03 | | | | 4.73 | | | | 11.60 | | | | 9.09 | |
| | | | | | | | | | | | | | | | |
| | | | | | | |
Total core and liquidating portfolios | | $ | 97,930 | | | | 106,592 | | | | | | 2.95 | | | | 3.22 | | | | 4.32 | | | | 3.13 | |
| | | | | | | | | | | | | | | | |
|
| |
| (1) | Consists predominantly of real estate 1-4 family junior lien mortgages and first and junior lines of credit secured by real estate, but excludes PCI loans because their losses are generally covered by PCI accounting adjustment at the date of acquisition, and excludes real estate 1-4 family first lien open-ended line reverse mortgages because they do not have scheduled payments. These reverse mortgage loans are insured by the FHA. |
| (2) | Reflects the implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series, which requires write-down of performing consumer loans restructured in bankruptcy to collateral value. |
| (3) | Includes $1.4 billion at September 30, 2012, and $1.5 billion at December 31, 2011, associated with the Pick-a-Pay portfolio. |
36
Wells Fargo & Company and Subsidiaries
CHANGES IN ALLOWANCE FOR CREDIT LOSSES
| | | | | | | | | | | | | | | | |
| |
| | | Quarter ended Sept. 30, | | | Nine months ended
Sept. 30, | |
| | | | | | | | |
| | | | |
| (in millions) | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| |
| | | | |
Balance, beginning of period | | $ | 18,646 | | | | 21,262 | | | | 19,668 | | | | 23,463 | |
Provision for credit losses | | | 1,591 | | | | 1,811 | | | | 5,386 | | | | 5,859 | |
Interest income on certain impaired loans (1) | | | (76) | | | | (84) | | | | (245) | | | | (246) | |
Loan charge-offs: | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | |
Commercial and industrial | | | (285) | | | | (349) | | | | (1,004) | | | | (1,182) | |
Real estate mortgage | | | (100) | | | | (119) | | | | (296) | | | | (483) | |
Real estate construction | | | (41) | | | | (98) | | | | (181) | | | | (316) | |
Lease financing | | | (5) | | | | (10) | | | | (18) | | | | (30) | |
Foreign | | | (35) | | | | (25) | | | | (81) | | | | (121) | |
| |
| | | | |
Total commercial | | | (466) | | | | (601) | | | | (1,580) | | | | (2,132) | |
| |
| | | | |
Consumer: | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | (719) | | | | (900) | | | | (2,319) | | | | (2,979) | |
Real estate 1-4 family junior lien mortgage | | | (1,095) | | | | (893) | | | | (2,672) | | | | (2,907) | |
Credit card | | | (255) | | | | (320) | | | | (842) | | | | (1,146) | |
Other revolving credit and installment | | | (336) | | | | (421) | | | | (1,027) | | | | (1,312) | |
| |
| | | | |
Total consumer (2) | | | (2,405) | | | | (2,534) | | | | (6,860) | | | | (8,344) | |
| |
| | | | |
Total loan charge-offs | | | (2,871) | | | | (3,135) | | | | (8,440) | | | | (10,476) | |
| |
| | | | |
Loan recoveries: | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 154 | | | | 88 | | | | 368 | | | | 313 | |
Real estate mortgage | | | 46 | | | | 23 | | | | 115 | | | | 107 | |
Real estate construction | | | 40 | | | | 43 | | | | 96 | | | | 106 | |
Lease financing | | | 4 | | | | 7 | | | | 15 | | | | 20 | |
Foreign | | | 5 | | | | 17 | | | | 26 | | | | 38 | |
| |
| | | | |
Total commercial | | | 249 | | | | 178 | | | | 620 | | | | 584 | |
| |
| | | | |
Consumer: | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 46 | | | | 79 | | | | 112 | | | | 345 | |
Real estate 1-4 family junior lien mortgage | | | 59 | | | | 51 | | | | 184 | | | | 162 | |
Credit card | | | 43 | | | | 54 | | | | 148 | | | | 204 | |
Other revolving credit and installment | | | 116 | | | | 162 | | | | 423 | | | | 522 | |
| |
| | | | |
Total consumer | | | 264 | | | | 346 | | | | 867 | | | | 1,233 | |
| |
| | | | |
Total loan recoveries | | | 513 | | | | 524 | | | | 1,487 | | | | 1,817 | |
| |
| | | | |
Net loan charge-offs (3) | | | (2,358) | | | | (2,611) | | | | (6,953) | | | | (8,659) | |
| |
| | | | |
Allowances related to business combinations/other | | | - | | | | (6) | | | | (53) | | | | (45) | |
| |
| | | | |
Balance, end of period | | $ | 17,803 | | | | 20,372 | | | | 17,803 | | | | 20,372 | |
| |
| | | | |
Components: | | | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 17,385 | | | | 20,039 | | | | 17,385 | | | | 20,039 | |
Allowance for unfunded credit commitments | | | 418 | | | | 333 | | | | 418 | | | | 333 | |
| |
| | | | |
Allowance for credit losses (4) | | $ | 17,803 | | | | 20,372 | | | | 17,803 | | | | 20,372 | |
| |
| | | | |
Net loan charge-offs (annualized) as a percentage of average total loans (3) | | | 1.21 | % | | | 1.37 | | | | 1.20 | | | | 1.54 | |
Allowance for loan losses as a percentage of total loans (4) | | | 2.22 | | | | 2.64 | | | | 2.22 | | | | 2.64 | |
Allowance for credit losses as a percentage of total loans (4) | | | 2.27 | | | | 2.68 | | | | 2.27 | | | | 2.68 | |
| |
| (1) | Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income. |
| (2) | Includes $567 million at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series, which requires write-down of performing consumer loans restructured in bankruptcy to collateral value. |
| (3) | For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates. |
| (4) | The allowance for credit losses includes $160 million and $302 million at September 30, 2012 and 2011, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs. |
37
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN ALLOWANCE FOR CREDIT LOSSES
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Balance, beginning of quarter | | $ | 18,646 | | | | 19,129 | | | | 19,668 | | | | 20,372 | | | | 21,262 | |
Provision for credit losses | | | 1,591 | | | | 1,800 | | | | 1,995 | | | | 2,040 | | | | 1,811 | |
Interest income on certain impaired loans (1) | | | (76) | | | | (82) | | | | (87) | | | | (86) | | | | (84) | |
Loan charge-offs: | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | (285) | | | | (360) | | | | (359) | | | | (416) | | | | (349) | |
Real estate mortgage | | | (100) | | | | (114) | | | | (82) | | | | (153) | | | | (119) | |
Real estate construction | | | (41) | | | | (60) | | | | (80) | | | | (35) | | | | (98) | |
Lease financing | | | (5) | | | | (5) | | | | (8) | | | | (8) | | | | (10) | |
Foreign | | | (35) | | | | (17) | | | | (29) | | | | (52) | | | | (25) | |
| |
| | | | | |
Total commercial | | | (466) | | | | (556) | | | | (558) | | | | (664) | | | | (601) | |
| |
| | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | (719) | | | | (772) | | | | (828) | | | | (904) | | | | (900) | |
Real estate 1-4 family junior lien mortgage | | | (1,095) | | | | (757) | | | | (820) | | | | (856) | | | | (893) | |
Credit card | | | (255) | | | | (286) | | | | (301) | | | | (303) | | | | (320) | |
Other revolving credit and installment | | | (336) | | | | (318) | | | | (373) | | | | (412) | | | | (421) | |
| |
| | | | | |
Total consumer (2) | | | (2,405) | | | | (2,133) | | | | (2,322) | | | | (2,475) | | | | (2,534) | |
| |
| | | | | |
Total loan charge-offs | | | (2,871) | | | | (2,689) | | | | (2,880) | | | | (3,139) | | | | (3,135) | |
| |
| | | | | |
Loan recoveries: | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 154 | | | | 111 | | | | 103 | | | | 106 | | | | 88 | |
Real estate mortgage | | | 46 | | | | 33 | | | | 36 | | | | 36 | | | | 23 | |
Real estate construction | | | 40 | | | | 43 | | | | 13 | | | | 40 | | | | 43 | |
Lease financing | | | 4 | | | | 5 | | | | 6 | | | | 4 | | | | 7 | |
Foreign | | | 5 | | | | 6 | | | | 15 | | | | 7 | | | | 17 | |
| |
| | | | | |
Total commercial | | | 249 | | | | 198 | | | | 173 | | | | 193 | | | | 178 | |
| |
| | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Real estate 1-4 family first mortgage | | | 46 | | | | 29 | | | | 37 | | | | 60 | | | | 79 | |
Real estate 1-4 family junior lien mortgage | | | 59 | | | | 68 | | | | 57 | | | | 56 | | | | 51 | |
Credit card | | | 43 | | | | 46 | | | | 59 | | | | 47 | | | | 54 | |
Other revolving credit and installment | | | 116 | | | | 148 | | | | 159 | | | | 143 | | | | 162 | |
| |
| | | | | |
Total consumer | | | 264 | | | | 291 | | | | 312 | | | | 306 | | | | 346 | |
| |
| | | | | |
Total loan recoveries | | | 513 | | | | 489 | | | | 485 | | | | 499 | | | | 524 | |
| |
| | | | | |
Net loan charge-offs | | | (2,358) | | | | (2,200) | | | | (2,395) | | | | (2,640) | | | | (2,611) | |
| |
| | | | | |
Allowances related to business combinations/other | | | - | | | | (1) | | | | (52) | | | | (18) | | | | (6) | |
| |
| | | | | |
Balance, end of quarter | | $ | 17,803 | | | | 18,646 | | | | 19,129 | | | | 19,668 | | | | 20,372 | |
| |
| | | | | |
Components: | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 17,385 | | | | 18,320 | | | | 18,852 | | | | 19,372 | | | | 20,039 | |
Allowance for unfunded credit commitments | | | 418 | | | | 326 | | | | 277 | | | | 296 | | | | 333 | |
| |
| | | | | |
Allowance for credit losses | | $ | 17,803 | | | | 18,646 | | | | 19,129 | | | | 19,668 | | | | 20,372 | |
| |
| | | | | |
Net loan charge-offs (annualized) as a percentage of average total loans | | | 1.21 | % | | | 1.15 | | | | 1.25 | | | | 1.36 | | | | 1.37 | |
Allowance for loan losses as a percentage of: | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 2.22 | | | | 2.36 | | | | 2.46 | | | | 2.52 | | | | 2.64 | |
Nonaccrual loans | | | 83 | | | | 89 | | | | 86 | | | | 91 | | | | 92 | |
Nonaccrual loans and other nonperforming assets | | | 69 | | | | 74 | | | | 71 | | | | 75 | | | | 75 | |
Allowance for credit losses as a percentage of: | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 2.27 | | | | 2.41 | | | | 2.50 | | | | 2.56 | | | | 2.68 | |
Nonaccrual loans | | | 85 | | | | 91 | | | | 87 | | | | 92 | | | | 93 | |
Nonaccrual loans and other nonperforming assets | | | 70 | | | | 75 | | | | 72 | | | | 76 | | | | 76 | |
|
| |
| (1) | Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan's effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income. |
| (2) | Includes $567 million at September 30, 2012, resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series, which requires write-down of performing consumer loans restructured in bankruptcy to collateral value. |
38
Wells Fargo & Company and Subsidiaries
FIVE QUARTER TIER 1 COMMON EQUITY UNDER BASEL I (1)
| | | | | | | | | | | | | | | | | | | | | | |
| |
| (in billions) | | | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | | |
Total equity | | | | $ | 156.1 | | | | 149.4 | | | | 146.8 | | | | 141.7 | | | | 139.2 | |
Noncontrolling interests | | | | | (1.4) | | | | (1.3) | | | | (1.3) | | | | (1.5) | | | | (1.5) | |
| |
| | | | | | |
Total Wells Fargo stockholders’ equity | | | | $ | 154.7 | | | | 148.1 | | | | 145.5 | | | | 140.2 | | | | 137.7 | |
| |
| | | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | | |
Preferred equity | | | | | (11.3) | | | | (10.6) | | | | (10.6) | | | | (10.6) | | | | (10.6) | |
Goodwill and intangible assets (other than MSRs) | | | | | (33.4) | | | | (33.5) | | | | (33.7) | | | | (34.0) | | | | (34.4) | |
Applicable deferred taxes | | | | | 3.3 | | | | 3.5 | | | | 3.7 | | | | 3.8 | | | | 4.0 | |
MSRs over specified limitations | | | | | (0.7) | | | | (0.7) | | | | (0.9) | | | | (0.8) | | | | (0.7) | |
Cumulative other comprehensive income | | | | | (6.4) | | | | (4.6) | | | | (4.1) | | | | (3.1) | | | | (3.7) | |
Other | | | | | (0.4) | | | | (0.5) | | | | (0.4) | | | | (0.4) | | | | (0.4) | |
| |
| | | | | | |
Tier 1 common equity | | (A) | | $ | 105.8 | | | | 101.7 | | | | 99.5 | | | | 95.1 | | | | 91.9 | |
| |
| | | | | | |
Total risk-weighted assets (2) | | (B) | | $ | 1,052.4 | | | | 1,008.6 | | | | 996.8 | | | | 1,005.6 | | | | 983.2 | |
| |
| | | | | | |
Tier 1 common equity to total risk-weighted assets | | (A)/(B) | | | 10.06 | % | | | 10.08 | | | | 9.98 | | | | 9.46 | | | | 9.34 | |
| |
| (1) | Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. |
| (2) | Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. The Company’s September 30, 2012, risk-weighted assets are preliminary and reflect the Company’s refinement to its determination of risk weighting of certain unused lending commitments that provide for the ability to issue standby letters of credit. Total estimated on-balance sheet, and total estimated derivative and off-balance sheet risk-weighted assets were $846.5 billion and $205.9 billion at September 30, 2012, respectively. |
TIER 1 COMMON EQUITY UNDER BASEL III (ESTIMATED) (1) (2)
| | | | | | | | | | | | |
| |
| (in billions) | | | | | | | | | | Sept. 30,
2012 | |
| |
| | | | | |
Tier 1 common equity under Basel I | | | | | | | | | | $ | 105.8 | |
| |
| | | | | |
Adjustments from Basel I to Basel III (3) (5): | | | | | | | | | | | | |
| | | | | |
Cumulative other comprehensive income related to AFS securities and defined benefit pension plans | | | | | | | | | | | 6.0 | |
| | | | | |
Other | | | | | | | | | | | 0.3 | |
| |
Total adjustments from Basel I to Basel III | | | | | | | | | | | 6.3 | |
Threshold deductions, as defined under Basel III (4) (5) | | | | | | | | | | | (0.7) | |
| |
| | | | | |
Tier 1 common equity anticipated under Basel III | | | | | | | | (C) | | $ | 111.4 | |
| |
| | | | | |
Total risk-weighted assets anticipated under Basel III (6) | | | | | | | | (D) | | $ | 1,390.1 | |
| |
| | | | | |
Tier 1 common equity to total risk-weighted assets anticipated under Basel III | | | | | | | | (C)/(D) | | | 8.02 | % |
| |
| (1) | Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants. |
| (2) | The Basel III Tier 1 common equity and risk-weighted assets are calculated based on management’s current interpretation of the Basel III capital rules proposed by federal banking agencies in notices of proposed rulemaking announced in June 2012. The proposed rules and interpretations and assumptions used in estimating Basel III calculations are subject to change depending on final promulgations of Basel III capital rules. |
| (3) | Adjustments from Basel I to Basel III represent reconciling adjustments, primarily certain components of cumulative other comprehensive income deducted for Basel I purposes, to derive Tier 1 common equity under Basel III. |
| (4) | Threshold deductions, as defined under Basel III, include individual and aggregate limitations, as a percentage of Tier 1 common equity, with respect to MSRs, deferred tax assets and investments in unconsolidated financial companies. |
| (5) | Volatility in interest rates can have a significant impact on the valuation of cumulative other comprehensive income and MSRs and therefore, may impact adjustments from Basel I to Basel III, and MSRs subject to threshold deductions, as defined under Basel III, in future reporting periods. |
| (6) | Under current Basel proposals, risk-weighted assets incorporate different classifications of assets, with certain risk weights based on a borrower’s credit rating or Wells Fargo’s own risk models, along with adjustments to address a combination of credit/counterparty, operational and market risks, and other Basel III elements. The amount of risk-weighted assets anticipated under Basel III is preliminary and subject to change depending on final promulgation of Basel III capital rulemaking and interpretations thereof by regulatory authorities. |
39
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
(income/expense in millions, average balances in billions) | | Community Banking | | | Wholesale
Banking | | | Wealth, Brokerage
and Retirement | | | Other (2) | | | Consolidated Company | |
| | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | | | | | | | | |
Quarter ended Sept. 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income (3) | | $ | 7,247 | | | | 7,272 | | | | 3,028 | | | | 2,897 | | | | 680 | | | | 716 | | | | (293 | ) | | | (343 | ) | | | 10,662 | | | | 10,542 | |
Provision (reversal of provision) for credit losses | | | 1,627 | | | | 1,974 | | | | (57 | ) | | | (178) | | | | 30 | | | | 48 | | | | (9 | ) | | | (33 | ) | | | 1,591 | | | | 1,811 | |
Noninterest income | | | 5,863 | | | | 5,238 | | | | 2,921 | | | | 2,238 | | | | 2,353 | | | | 2,172 | | | | (586 | ) | | | (562 | ) | | | 10,551 | | | | 9,086 | |
Noninterest expense | | | 7,402 | | | | 6,905 | | | | 2,908 | | | | 2,689 | | | | 2,457 | | | | 2,371 | | | | (655 | ) | | | (288 | ) | | | 12,112 | | | | 11,677 | |
| | | | | | | | | | |
Income (loss) before income tax expense (benefit) | | | 4,081 | | | | 3,631 | | | | 3,098 | | | | 2,624 | | | | 546 | | | | 469 | | | | (215 | ) | | | (584 | ) | | | 7,510 | | | | 6,140 | |
Income tax expense (benefit) | | | 1,250 | | | | 1,220 | | | | 1,103 | | | | 822 | | | | 208 | | | | 178 | | | | (81 | ) | | | (222 | ) | | | 2,480 | | | | 1,998 | |
| | | | | | | | | | |
Net income (loss) before noncontrolling interests | | | 2,831 | | | | 2,411 | | | | 1,995 | | | | 1,802 | | | | 338 | | | | 291 | | | | (134 | ) | | | (362 | ) | | | 5,030 | | | | 4,142 | |
Less: Net income (loss) from noncontrolling interests | | | 91 | | | | 87 | | | | 2 | | | | (1) | | | | - | | | | 1 | | | | - | | | | - | | | | 93 | | | | 87 | |
| | | | | | | | | | |
Net income (loss) (4) | | $ | 2,740 | | | | 2,324 | | | | 1,993 | | | | 1,803 | | | | 338 | | | | 290 | | | | (134 | ) | | | (362 | ) | | | 4,937 | | | | 4,055 | |
| |
| | | | | | | | | | |
Average loans | | $ | 485.3 | | | | 489.7 | | | | 277.1 | | | | 253.4 | | | | 42.5 | | | | 43.1 | | | | (28.2 | ) | | | (31.7 | ) | | | 776.7 | | | | 754.5 | |
Average assets | | | 765.1 | | | | 751.8 | | | | 490.7 | | | | 437.1 | | | | 163.8 | | | | 158.4 | | | | (65.3 | ) | | | (65.9 | ) | | | 1,354.3 | | | | 1,281.4 | |
Average core deposits | | | 594.5 | | | | 556.4 | | | | 225.4 | | | | 209.3 | | | | 136.7 | | | | 133.3 | | | | (61.2 | ) | | | (62.2 | ) | | | 895.4 | | | | 836.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | |
Nine months ended Sept. 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income (3) | | $ | 21,879 | | | | 22,237 | | | | 9,556 | | | | 8,545 | | | | 2,079 | | | | 2,113 | | | | (927 | ) | | | (1,024 | ) | | | 32,587 | | | | 31,871 | |
Provision (reversal of provision) for credit losses | | | 5,078 | | | | 5,951 | | | | 226 | | | | (141) | | | | 110 | | | | 150 | | | | (28 | ) | | | (101 | ) | | | 5,386 | | | | 5,859 | |
Noninterest income | | | 17,744 | | | | 15,535 | | | | 8,543 | | | | 7,607 | | | | 6,987 | | | | 7,022 | | | | (1,723 | ) | | | (1,692 | ) | | | 31,551 | | | | 28,472 | |
Noninterest expense | | | 22,807 | | | | 21,939 | | | | 9,075 | | | | 8,239 | | | | 7,380 | | | | 7,414 | | | | (1,760 | ) | | | (707 | ) | | | 37,502 | | | | 36,885 | |
| | | | | | | | | | |
Income (loss) before income tax expense (benefit) | | | 11,738 | | | | 9,882 | | | | 8,798 | | | | 8,054 | | | | 1,576 | | | | 1,571 | | | | (862 | ) | | | (1,908 | ) | | | 21,250 | | | | 17,599 | |
Income tax expense (benefit) | | | 3,856 | | | | 3,020 | | | | 3,051 | | | | 2,682 | | | | 599 | | | | 594 | | | | (327 | ) | | | (725 | ) | | | 7,179 | | | | 5,571 | |
| | | | | | | | | | |
Net income (loss) before noncontrolling interests | | | 7,882 | | | | 6,862 | | | | 5,747 | | | | 5,372 | | | | 977 | | | | 977 | | | | (535 | ) | | | (1,183 | ) | | | 14,071 | | | | 12,028 | |
Less: Net income from noncontrolling interests | | | 259 | | | | 238 | | | | 5 | | | | 21 | | | | - | | | | 7 | | | | - | | | | - | | | | 264 | | | | 266 | |
| | | | | | | | | | |
Net income (loss) (4) | | $ | 7,623 | | | | 6,624 | | | | 5,742 | | | | 5,351 | | | | 977 | | | | 970 | | | | (535 | ) | | | (1,183 | ) | | | 13,807 | | | | 11,762 | |
| |
| | | | | | | | | | |
Average loans | | $ | 485.1 | | | | 498.3 | | | | 272.0 | | | | 243.7 | | | | 42.5 | | | | 43.1 | | | | (28.4 | ) | | | (31.8 | ) | | | 771.2 | | | | 753.3 | |
Average assets | | | 750.1 | | | | 752.0 | | | | 479.0 | | | | 417.9 | | | | 162.2 | | | | 153.3 | | | | (64.9 | ) | | | (65.2 | ) | | | 1,326.4 | | | | 1,258.0 | |
Average core deposits | | | 585.3 | | | | 552.3 | | | | 222.4 | | | | 195.0 | | | | 135.5 | | | | 128.2 | | | | (61.0 | ) | | | (61.6 | ) | | | 882.2 | | | | 813.9 | |
|
| |
| (1) | The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. In first quarter 2012, we modified internal funds transfer rates and the allocation of funding. The prior periods have been revised to reflect these changes. |
| (2) | Includes Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores. |
| (3) | Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. |
| (4) | Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the consolidated company. |
40
Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| (income/expense in millions, average balances in billions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
COMMUNITY BANKING | | | | | | | | | | | | | | | | | | | | |
Net interest income (2) | | $ | 7,247 | | | | 7,306 | | �� | | 7,326 | | | | 7,420 | | | | 7,272 | |
Provision for credit losses | | | 1,627 | | | | 1,573 | | | | 1,878 | | | | 2,025 | | | | 1,974 | |
Noninterest income | | | 5,863 | | | | 5,786 | | | | 6,095 | | | | 5,589 | | | | 5,238 | |
Noninterest expense | | | 7,402 | | | | 7,580 | | | | 7,825 | | | | 7,313 | | | | 6,905 | |
| |
| | | | | |
Income before income tax expense | | | 4,081 | | | | 3,939 | | | | 3,718 | | | | 3,671 | | | | 3,631 | |
Income tax expense | | | 1,250 | | | | 1,313 | | | | 1,293 | | | | 1,084 | | | | 1,220 | |
| |
| | | | | |
Net income before noncontrolling interests | | | 2,831 | | | | 2,626 | | | | 2,425 | | | | 2,587 | | | | 2,411 | |
Less: Net income from noncontrolling interests | | | 91 | | | | 91 | | | | 77 | | | | 78 | | | | 87 | |
| |
| | | | | |
Segment net income | | $ | 2,740 | | | | 2,535 | | | | 2,348 | | | | 2,509 | | | | 2,324 | |
| |
| | | | | |
Average loans | | $ | 485.3 | | | | 483.9 | | | | 486.1 | | | | 490.6 | | | | 489.7 | |
Average assets | | | 765.1 | | | | 746.6 | | | | 738.3 | | | | 753.3 | | | | 751.8 | |
Average core deposits | | | 594.5 | | | | 586.1 | | | | 575.2 | | | | 568.4 | | | | 556.4 | |
|
| |
| | | | | |
WHOLESALE BANKING | | | | | | | | | | | | | | | | | | | | |
Net interest income (2) | | $ | 3,028 | | | | 3,347 | | | | 3,181 | | | | 3,071 | | | | 2,897 | |
Provision (reversal of provision) for credit losses | | | (57) | | | | 188 | | | | 95 | | | | 31 | | | | (178) | |
Noninterest income | | | 2,921 | | | | 2,770 | | | | 2,852 | | | | 2,345 | | | | 2,238 | |
Noninterest expense | | | 2,908 | | | | 3,113 | | | | 3,054 | | | | 2,938 | | | | 2,689 | |
| |
| | | | | |
Income before income tax expense | | | 3,098 | | | | 2,816 | | | | 2,884 | | | | 2,447 | | | | 2,624 | |
Income tax expense | | | 1,103 | | | | 932 | | | | 1,016 | | | | 813 | | | | 822 | |
| |
| | | | | |
Net income before noncontrolling interests | | | 1,995 | | | | 1,884 | | | | 1,868 | | | | 1,634 | | | | 1,802 | |
Less: Net income (loss) from noncontrolling interests | | | 2 | | | | 3 | | | | - | | | | (2) | | | | (1) | |
| |
| | | | | |
Segment net income | | $ | 1,993 | | | | 1,881 | | | | 1,868 | | | | 1,636 | | | | 1,803 | |
| |
| | | | | |
Average loans | | $ | 277.1 | | | | 270.2 | | | | 268.6 | | | | 265.1 | | | | 253.4 | |
Average assets | | | 490.7 | | | | 478.4 | | | | 467.8 | | | | 458.3 | | | | 437.1 | |
Average core deposits | | | 225.4 | | | | 220.9 | | | | 220.9 | | | | 223.2 | | | | 209.3 | |
|
| |
| | | | | |
WEALTH, BROKERAGE AND RETIREMENT | | | | | | | | | | | | | | | | | | | | |
Net interest income (2) | | $ | 680 | | | | 698 | | | | 701 | | | | 731 | | | | 716 | |
Provision for credit losses | | | 30 | | | | 37 | | | | 43 | | | | 20 | | | | 48 | |
Noninterest income | | | 2,353 | | | | 2,273 | | | | 2,361 | | | | 2,311 | | | | 2,172 | |
Noninterest expense | | | 2,457 | | | | 2,376 | | | | 2,547 | | | | 2,520 | | | | 2,371 | |
| |
| | | | | |
Income before income tax expense | | | 546 | | | | 558 | | | | 472 | | | | 502 | | | | 469 | |
Income tax expense | | | 208 | | | | 210 | | | | 181 | | | | 191 | | | | 178 | |
| |
| | | | | |
Net income before noncontrolling interests | | | 338 | | | | 348 | | | | 291 | | | | 311 | | | | 291 | |
Less: Net income (loss) from noncontrolling interests | | | - | | | | 5 | | | | (5) | | | | - | | | | 1 | |
| |
| | | | | |
Segment net income | | $ | 338 | | | | 343 | | | | 296 | | | | 311 | | | | 290 | |
| |
| | | | | |
Average loans | | $ | 42.5 | | | | 42.5 | | | | 42.5 | | | | 42.8 | | | | 43.1 | |
Average assets | | | 163.8 | | | | 160.9 | | | | 161.9 | | | | 160.6 | | | | 158.4 | |
Average core deposits | | | 136.7 | | | | 134.2 | | | | 135.6 | | | | 135.2 | | | | 133.3 | |
|
| |
| | | | | |
OTHER (3) | | | | | | | | | | | | | | | | | | | | |
Net interest income (2) | | $ | (293) | | | | (314) | | | | (320) | | | | (330) | | | | (343) | |
Provision (reversal of provision) for credit losses | | | (9) | | | | 2 | | | | (21) | | | | (36) | | | | (33) | |
Noninterest income | | | (586) | | | | (577) | | | | (560) | | | | (532) | | | | (562) | |
Noninterest expense | | | (655) | | | | (672) | | | | (433) | | | | (263) | | | | (288) | |
| |
| | | | | |
Loss before income tax benefit | | | (215) | | | | (221) | | | | (426) | | | | (563) | | | | (584) | |
Income tax benefit | | | (81) | | | | (84) | | | | (162) | | | | (214) | | | | (222) | |
| |
| | | | | |
Net loss before noncontrolling interests | | | (134) | | | | (137) | | | | (264) | | | | (349) | | | | (362) | |
Less: Net income from noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | |
| |
| | | | | |
Other net loss | | $ | (134) | | | | (137) | | | | (264) | | | | (349) | | | | (362) | |
| |
| | | | | |
Average loans | | $ | (28.2) | | | | (28.4) | | | | (28.6) | | | | (29.9) | | | | (31.7) | |
Average assets | | | (65.3) | | | | (64.3) | | | | (65.1) | | | | (65.5) | | | | (65.9) | |
Average core deposits | | | (61.2) | | | | (60.6) | | | | (61.2) | | | | (61.9) | | | | (62.2) | |
|
| |
| | | | | |
CONSOLIDATED COMPANY | | | | | | | | | | | | | | | | | | | | |
Net interest income (2) | | $ | 10,662 | | | | 11,037 | | | | 10,888 | | | | 10,892 | | | | 10,542 | |
Provision for credit losses | | | 1,591 | | | | 1,800 | | | | 1,995 | | | | 2,040 | | | | 1,811 | |
Noninterest income | | | 10,551 | | | | 10,252 | | | | 10,748 | | | | 9,713 | | | | 9,086 | |
Noninterest expense | | | 12,112 | | | | 12,397 | | | | 12,993 | | | | 12,508 | | | | 11,677 | |
| |
| | | | | |
Income before income tax expense | | | 7,510 | | | | 7,092 | | | | 6,648 | | | | 6,057 | | | | 6,140 | |
Income tax expense | | | 2,480 | | | | 2,371 | | | | 2,328 | | | | 1,874 | | | | 1,998 | |
| |
| | | | | |
Net income before noncontrolling interests | | | 5,030 | | | | 4,721 | | | | 4,320 | | | | 4,183 | | | | 4,142 | |
Less: Net income from noncontrolling interests | | | 93 | | | | 99 | | | | 72 | | | | 76 | | | | 87 | |
| |
Wells Fargo net income | | $ | 4,937 | | | | 4,622 | | | | 4,248 | | | | 4,107 | | | | 4,055 | |
| |
| | | | | |
Average loans | | $ | 776.7 | | | | 768.2 | | | | 768.6 | | | | 768.6 | | | | 754.5 | |
Average assets | | | 1,354.3 | | | | 1,321.6 | | | | 1,302.9 | | | | 1,306.7 | | | | 1,281.4 | |
Average core deposits | | | 895.4 | | | | 880.6 | | | | 870.5 | | | | 864.9 | | | | 836.8 | |
|
| |
| (1) | The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. In first quarter 2012, we modified internal funds transfer rates and the allocation of funding. Prior periods have been revised to reflect these changes. |
| (2) | Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. |
| (3) | Includes Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores. |
41
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
MSRs measured using the fair value method: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Fair value, beginning of quarter | | $ | 12,081 | | | | 13,578 | | | | 12,603 | | | | 12,372 | | | | 14,778 | |
Servicing from securitizations or asset transfers (1) | | | 1,173 | | | | 1,139 | | | | 1,776 | | | | 1,211 | | | | 744 | |
Sales | | | - | | | | (293) | | | | - | | | | - | | | | - | |
| |
| | | | | |
Net additions | | | 1,173 | | | | 846 | | | | 1,776 | | | | 1,211 | | | | 744 | |
| |
| | | | | |
Changes in fair value: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Due to changes in valuation model inputs or assumptions: | | | | | | | | | | | | | | | | | | | | |
Mortgage interest rates (2) | | | (1,131) | | | | (1,496) | | | | 147 | | | | (483) | | | | (2,867) | |
Servicing and foreclosure costs (3) | | | (350) | | | | (146) | | | | (54) | | | | (2) | | | | (33) | |
Discount rates (4) | | | - | | | | - | | | | (344) | | | | - | | | | - | |
Prepayment estimates and other (5) | | | 54 | | | | 11 | | | | 93 | | | | 21 | | | | 260 | |
| |
| | | | | |
Net changes in valuation model inputs or assumptions | | | (1,427) | | | | (1,631) | | | | (158) | | | | (464) | | | | (2,640) | |
| |
Other changes in fair value (6) | | | (871) | | | | (712) | | | | (643) | | | | (516) | | | | (510) | |
| |
| | | | | |
Total changes in fair value | | | (2,298) | | | | (2,343) | | | | (801) | | | | (980) | | | | (3,150) | |
| |
| | | | | |
Fair value, end of quarter | | $ | 10,956 | | | | 12,081 | | | | 13,578 | | | | 12,603 | | | | 12,372 | |
| |
| (1) | Quarter ended March 31, 2012, includes $315 million residential MSRs transferred from amortized MSRs that we elected to carry at fair value effective January 1, 2012. |
| (2) | Primarily represents prepayment speed changes due to changes in mortgage interest rates, but also includes other valuation changes due to changes in mortgage interest rates (such as changes in estimated interest earned on custodial deposit balances). |
| (3) | Includes costs to service and unreimbursed foreclosure costs. |
| (4) | Reflects discount rate assumption change, excluding portion attributable to changes in mortgage interest rates; the first quarter 2012 change reflects increased capital return requirements from market participants. |
| (5) | Represents changes driven by other valuation model inputs or assumptions including prepayment speed estimation changes and other assumption updates. Prepayment speed estimation changes are influenced by observed changes in borrower behavior. |
| (6) | Represents changes due to collection/realization of expected cash flows over time. |
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Amortized MSRs: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Balance, beginning of quarter | | $ | 1,130 | | | | 1,074 | | | | 1,445 | | | | 1,437 | | | | 1,432 | |
Purchases | | | 42 | | | | 78 | | | | 14 | | | | 53 | | | | 21 | |
Servicing from securitizations or asset transfers (1) | | | 30 | | | | 34 | | | | (327) | | | | 26 | | | | 50 | |
Amortization | | | (58) | | | | (56) | | | | (58) | | | | (71) | | | | (66) | |
| |
| | | | | |
Balance, end of quarter | | | 1,144 | | | | 1,130 | | | | 1,074 | | | | 1,445 | | | | 1,437 | |
| |
| | | | | |
Valuation Allowance: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Balance, beginning of quarter | | | - | | | | - | | | | (37) | | | | (40) | | | | (10) | |
Reversal of provision (provision) for MSRs in excess of fair value (1) | | | - | | | | - | | | | 37 | | | | 3 | | | | (30) | |
| |
| | | | | |
Balance, end of quarter | | | - | | | | - | | | | - | | | | (37) | | | | (40) | |
| |
| | | | | |
Amortized MSRs, net | | $ | 1,144 | | | | 1,130 | | | | 1,074 | | | | 1,408 | | | | 1,397 | |
| |
| | | | | |
Fair value of amortized MSRs: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Beginning of quarter | | $ | 1,450 | | | | 1,263 | | | | 1,756 | | | | 1,759 | | | | 1,805 | |
End of quarter | | | 1,399 | | | | 1,450 | | | | 1,263 | | | | 1,756 | | | | 1,759 | |
| |
| (1) | Quarter ended March 31, 2012, is net of $350 million ($313 million after valuation allowance) of residential MSRs that we elected to carry at fair value effective January 1, 2012. A cumulative adjustment of $2 million to fair value was recorded in retained earnings at January 1, 2012. |
42
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Servicing income, net: | | | | | | | | | | | | | | | | | | | | |
Servicing fees (1) | | $ | 984 | | | | 1,070 | | | | 1,011 | | | | 876 | | | | 1,029 | |
Changes in fair value of MSRs carried at fair value: | | | | | | | | | | | | | | | | | | | | |
Due to changes in valuation model inputs or assumptions (2) | | | (1,427) | | | | (1,631) | | | | (158) | | | | (464) | | | | (2,640) | |
Other changes in fair value (3) | | | (871) | | | | (712) | | | | (643) | | | | (516) | | | | (510) | |
| |
| | | | | |
Total changes in fair value of MSRs carried at fair value | | | (2,298) | | | | (2,343) | | | | (801) | | | | (980) | | | | (3,150) | |
Amortization | | | (58) | | | | (56) | | | | (58) | | | | (71) | | | | (66) | |
Reversal of provision (provision) for MSRs in excess of fair value | | | - | | | | - | | | | - | | | | 3 | | | | (30) | |
Net derivative gains from economic hedges (4) | | | 1,569 | | | | 2,008 | | | | 100 | | | | 665 | | | | 3,247 | |
| |
| | | | | |
Total servicing income, net | | $ | 197 | | | | 679 | | | | 252 | | | | 493 | | | | 1,030 | |
| |
| | | | | |
Market-related valuation changes to MSRs, net of hedge results (2)+(4) | | $ | 142 | | | | 377 | | | | (58) | | | | 201 | | | | 607 | |
|
| |
| (1) | Includes contractually specified servicing fees, late charges and other ancillary revenues. |
| (2) | Refer to the changes in fair value MSRs table on page 41 for more detail. |
| (3) | Represents changes due to collection/realization of expected cash flows over time. |
| (4) | Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs. |
| | | | | | | | | | | | | | | | | | | | |
| |
| (in billions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Managed servicing portfolio (1): | | | | | | | | | | | | | | | | | | | | |
Residential mortgage servicing: | | | | | | | | | | | | | | | | | | | | |
Serviced for others | | $ | 1,508 | | | | 1,499 | | | | 1,483 | | | | 1,456 | | | | 1,457 | |
Owned loans serviced | | | 364 | | | | 357 | | | | 350 | | | | 358 | | | | 349 | |
Subservicing | | | 7 | | | | 7 | | | | 7 | | | | 8 | | | | 8 | |
| |
| | | | | |
Total residential servicing | | | 1,879 | | | | 1,863 | | | | 1,840 | | | | 1,822 | | | | 1,814 | |
| |
| | | | | |
Commercial mortgage servicing: | | | | | | | | | | | | | | | | | | | | |
Serviced for others | | | 405 | | | | 406 | | | | 407 | | | | 398 | | | | 401 | |
Owned loans serviced | | | 105 | | | | 106 | | | | 106 | | | | 106 | | | | 104 | |
Subservicing | | | 13 | | | | 13 | | | | 13 | | | | 14 | | | | 14 | |
| |
| | | | | |
Total commercial servicing | | | 523 | | | | 525 | | | | 526 | | | | 518 | | | | 519 | |
| |
| | | | | |
Total managed servicing portfolio | | $ | 2,402 | | | | 2,388 | | | | 2,366 | | | | 2,340 | | | | 2,333 | |
| |
| | | | | |
Total serviced for others | | $ | 1,913 | | | | 1,905 | | | | 1,890 | | | | 1,854 | | | | 1,858 | |
Ratio of MSRs to related loans serviced for others | | | 0.63 | % | | | 0.69 | | | | 0.77 | | | | 0.76 | | | | 0.74 | |
Weighted-average note rate (mortgage loans serviced for others) | | | 4.87 | | | | 4.97 | | | | 5.05 | | | | 5.14 | | | | 5.21 | |
| |
| (1) | The components of our managed servicing portfolio are presented at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced. |
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | |
| | | | |
| (in billions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Mar. 31,
2012 | | | Dec. 31,
2011 | | | Sept. 30,
2011 | |
| |
| | | | | |
Application data: | | | | | | | | | | | | | | | | | | | | |
Wells Fargo first mortgage quarterly applications | | $ | 188 | | | | 208 | | | | 188 | | | | 157 | | | | 169 | |
Refinances as a percentage of applications | | | 72 | % | | | 69 | | | | 76 | | | | 78 | | | | 74 | |
Wells Fargo first mortgage unclosed pipeline, at quarter end | | $ | 97 | | | | 102 | | | | 79 | | | | 72 | | | | 84 | |
|
| |
| | | | | | | | | | | | | | | | | | | | |
| |
| | | | | |
Residential Real Estate Originations: | | | | | | | | | | | | | | | | | | | | |
Wells Fargo first mortgage loans: | | | | | | | | | | | | | | | | | | | | |
Retail | | $ | 61 | | | | 62 | | | | 61 | | | | 58 | | | | 43 | |
Correspondent/Wholesale | | | 77 | | | | 68 | | | | 68 | | | | 61 | | | | 45 | |
Other (1) | | | 1 | | | | 1 | | | | - | | | | 1 | | | | 1 | |
| |
| | | | | |
Total quarter-to-date | | $ | 139 | | | | 131 | | | | 129 | | | | 120 | | | | 89 | |
| |
| | | | | |
Total year-to-date | | $ | 399 | | | | 260 | | | | 129 | | | | 357 | | | | 237 | |
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| (1) | Consists of home equity loans and lines. |
43
Wells Fargo & Company and Subsidiaries
CHANGES IN MORTGAGE REPURCHASE LIABILITY
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Quarter ended | | | Nine months ended | |
| | | | | | | | |
| (in millions) | | Sept. 30,
2012 | | | June 30,
2012 | | | Sept. 30,
2011 | | | Sept. 30,
2012 | | | Sept. 30, 2011 | |
| |
| | | | | |
Balance, beginning of period | | $ | 1,764 | | | | 1,444 | | | | 1,188 | | | | 1,326 | | | | 1,289 | |
Provision for repurchase losses: | | | | | | | | | | | | | | | | | | | | |
Loan sales | | | 75 | | | | 72 | | | | 19 | | | | 209 | | | | 74 | |
Change in estimate (1) | | | 387 | | | | 597 | | | | 371 | | | | 1,352 | | | | 807 | |
| |
| | | | | |
Total additions | | | 462 | | | | 669 | | | | 390 | | | | 1,561 | | | | 881 | |
| | | | | |
Losses | | | (193) | | | | (349) | | | | (384) | | | | (854) | | | | (976) | |
| |
| | | | | |
Balance, end of period | | $ | 2,033 | | | | 1,764 | | | | 1,194 | | | | 2,033 | | | | 1,194 | |
| |
(1) Results from such factors as changes in investor demand and mortgage insurer practices, credit deterioration and changes in the financial stability of correspondent lenders.
UNRESOLVED REPURCHASE DEMANDS AND MORTGAGE INSURANCE RESCISSIONS
| | | | | | | | | | | | | | | | |
| |
| ($ in millions) | | Government
sponsored
entities (1) | | | Private | | | Mortgage
insurance
rescissions (2) | | | Total | |
| |
| | | | |
September 30, 2012 | | | | | | | | | | | | | | | | |
Number of loans | | | 6,525 | | | | 1,513 | | | | 817 | | | | 8,855 | |
Original loan balance (3) | | $ | 1,489 | | | | 331 | | | | 183 | | | | 2,003 | |
| | | | |
June 30, 2012 | | | | | | | | | | | | | | | | |
Number of loans | | | 5,687 | | | | 913 | | | | 840 | | | | 7,440 | |
Original loan balance (3) | | $ | 1,265 | | | | 213 | | | | 188 | | | | 1,666 | |
| | | | |
March 31, 2012 | | | | | | | | | | | | | | | | |
Number of loans | | | 6,333 | | | | 857 | | | | 970 | | | | 8,160 | |
Original loan balance (3) | | $ | 1,398 | | | | 241 | | | | 217 | | | | 1,856 | |
| | | | |
December 31, 2011 | | | | | | | | | | | | | | | | |
Number of loans | | | 7,066 | | | | 470 | | | | 1,178 | | | | 8,714 | |
Original loan balance (3) | | $ | 1,575 | | | | 167 | | | | 268 | | | | 2,010 | |
| | | | |
September 30, 2011 | | | | | | | | | | | | | | | | |
Number of loans | | | 6,577 | | | | 582 | | | | 1,508 | | | | 8,667 | |
Original loan balance (3) | | $ | 1,500 | | | | 208 | | | | 314 | | | | 2,022 | |
|
| |
| (1) | Includes repurchase demands of 534 and $111 million, 526 and $103 million, 694 and $131 million, 861 and $161 million, and 878 and $173 million, for September 30, June 30 and March 31, 2012, and December 31 and September 30, 2011, respectively, received from investors on mortgage servicing rights acquired from other originators. We generally have the right of recourse against the seller and may be able to recover losses related to such repurchase demands subject to counterparty risk associated with the seller. The number of repurchase demands from GSEs that are from mortgage loans originated in 2006 through 2008 totaled 80% at September 30, 2012. |
| (2) | As part of our representations and warranties in our loan sales contracts, we typically represent to GSEs and private investors that certain loans have mortgage insurance to the extent there are loans that have loan to value ratios in excess of 80% that require mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer due to a claim of breach of a contractual representation or warranty, the lack of insurance may result in a repurchase demand from an investor. Similar to repurchase demands, we evaluate mortgage insurance rescission notices for validity and appeal for reinstatement if the rescission was not based on a contractual breach. When investor demands are received due to lack of mortgage insurance, they are reported as unresolved repurchase demands based on the applicable investor category for the loan (GSE or private). Over the last year, approximately 20% of our repurchase demands from GSEs had mortgage insurance rescission as one of the reasons for the repurchase demand. Of all the mortgage insurance rescissions notices received in 2011, approximately 80% have resulted in repurchase demands through September 2012. Not all mortgage insurance rescissions received in 2011 have been completed through the appeals process with the mortgage insurer and upon successful appeal, we work with the investor to rescind the repurchase demand. |
| (3) | While the original loan balances related to these demands are presented above, the establishment of the repurchase liability is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property. |
